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Gold may find support as ongoing trade-related uncertainties continue to weigh on market sentiment.
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Traders are closely watching this week’s trade talks between the US and the EU for further direction.
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US Treasury Secretary Bessent cautioned that the Federal Reserve’s monetary policy independence could be threatened by an expanding mandate.
Gold (XAU/USD) edged lower on Tuesday, snapping a two-day winning streak. Despite the dip, the precious metal remains supported by ongoing uncertainty surrounding US trade policy and growing concerns over the Federal Reserve’s (Fed) independence—both of which could limit downside pressure.
Investors are closely watching this week’s trade negotiations between the United States and the European Union, with hopes of finalizing a deal before the August 1 deadline. President Donald Trump has threatened to impose 30% tariffs on EU exports if no agreement is reached. According to Reuters, EU diplomats have warned that the bloc is preparing broader countermeasures, as the chances of reaching a deal with Washington continue to diminish.
Adding to market unease, US Treasury Secretary Scott Bessent raised concerns over the Fed’s increasing involvement in non-monetary areas, calling it a case of "mandate creep." Bessent urged a full review of the central bank’s expanded role and suggested reassessing the institution’s broader function. Meanwhile, President Trump’s renewed criticism of Fed Chair Jerome Powell for not cutting rates has fueled speculation over the potential for his dismissal, further clouding the Fed’s policy outlook.
In the eurozone, the European Central Bank (ECB) is widely expected to keep interest rates unchanged at 2.0% during its Thursday meeting, following a series of cuts. Market attention will then shift to next week’s US Federal Reserve policy decision, which could significantly influence Gold’s next major move.
Daily Digest Market Movers: Gold Slides as US Dollar Holds Firm Amid Mixed Fed Signals
- Gold prices edged lower on Tuesday as the US Dollar regained strength, buoyed by market caution. The US Dollar Index (DXY)—which tracks the USD against a basket of six major currencies—hovered near 97.90, recovering after a more than 0.50% loss in the previous session. The firmer Greenback has weighed on dollar-denominated Gold, making it less attractive for foreign buyers.
- Political and policy-related uncertainties surrounding the Federal Reserve also contributed to market jitters. A White House official suggested that President Donald Trump might remove Fed Chair Jerome Powell, though Trump dismissed the claim as “typically untruthful” in a Truth Social post on Sunday.
- Adding to the controversy, Republican Congresswoman Anna Paulina Luna formally accused Powell of perjury, referencing two alleged incidents tied to discussions over the Fed’s planned renovations of its Washington headquarters.
- The Fed’s policy outlook remains divided: FOMC Governor Adriana Kugler advised against lowering interest rates anytime soon, warning that tariffs from the Trump era are beginning to fuel consumer price inflation. Kugler emphasized the need for a restrictive policy to anchor inflation expectations.
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San Francisco Fed President Mary Daly said that projecting two rate cuts this year is a “reasonable” scenario but warned against unnecessary delays. She expects long-term rates to stabilize at 3% or higher, above pre-pandemic levels.
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In contrast, Fed Governor Christopher Waller voiced support for a rate cut in July, citing growing economic risks. He cautioned that postponing action could force the Fed into a more aggressive stance later.
- The combination of Fed uncertainty, political speculation, and a stronger USD continues to put pressure on Gold prices, even as underlying bullish sentiment remains intact.
Gold Technical Outlook (XAU/USD)
Despite the recent dip, Gold maintains a bullish technical structure on the daily chart, trading within an ascending channel pattern. The 14-day Relative Strength Index (RSI) remains above the 50-mark, signaling continued upward momentum.
Immediate resistance is seen at the three-month high of $3,452 (June 16), followed by the all-time high of $3,500 (April 22). A decisive break above could open the door toward the channel’s upper boundary near $3,630.
On the downside, the first support lies at the 9-day Exponential Moving Average (EMA) of $3,358. A breach of this level could trigger a deeper pullback toward the channel’s lower boundary and the 50-day EMA at $3,316.
In summary, while short-term weakness persists, the broader trend for XAU/USD remains bullish unless key support levels are broken. Traders will remain tuned to further developments on Fed policy and US-EU trade dynamics, both of which could influence Gold's next move.
XAU/USD: Daily Chart
