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Gold price gives up intraday gains, retreating to around $3,300 as the US Dollar finds short-term support.
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Persistent concerns over the widening US fiscal deficit continue to support a bullish outlook for Gold.
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US President Trump remarks that Russia is unlikely to halt the war in Ukraine, adding to geopolitical uncertainty.
Gold (XAU/USD) slipped back toward $3,300 during Thursday's European session after reaching a two-week high of around $3,345 earlier in the day. The pullback in the precious metal follows a modest rebound in the US Dollar (USD), which gained traction after hitting a two-week low on Wednesday. The US Dollar Index (DXY), which measures the Greenback against six major currencies, rose 0.15% to around 99.85 at the time of writing, up from its recent low of 99.35.
A stronger US Dollar typically weighs on Gold, as it raises the relative cost of holding the non-yielding asset. However, despite the minor pullback, the broader outlook for Gold remains positive. Persistent concerns over the US's expanding fiscal deficit and ballooning debt continue to boost demand for safe-haven assets like Gold, even as Treasury yields fluctuate.
Adding to the bullish sentiment are geopolitical developments, particularly around Russia and Ukraine. While earlier in the week President Trump suggested truce talks were imminent, he has since expressed doubt over a resolution, citing Russian President Vladimir Putin’s belief that he is winning the war. This shift in tone has further diminished hopes for peace and supported Gold's appeal amid elevated global uncertainty.
Daily Market Movers: US Fiscal Crisis and Russia-Ukraine War Fuel Gold Demand
- Gold's strength in recent sessions has been driven largely by fears surrounding the US fiscal landscape. On Wednesday, the House Rules Committee, led by Republicans, approved President Trump’s proposed tax-cut bill, clearing it for a full House vote. According to the Congressional Budget Office (CBO), the legislation is projected to add $3.8 trillion to the national debt over the next decade.
- Market analysts warn that this bill could exacerbate the fiscal deficit crisis and increase future interest payment burdens, especially at a time when Trump’s tariff policies are already threatening economic stability.
- These concerns were further amplified when Moody’s downgraded the US sovereign credit rating from Aaa to Aa1, citing repeated failures by Congress and successive administrations to implement sustainable fiscal reforms.
- Domestically, investors are also bracing for potential stagflation. JPMorgan CEO Jamie Dimon voiced support for the Federal Reserve’s decision to hold rates steady, citing the risks posed by deficits, geopolitical instability, and ongoing price pressures. He warned that the economy is not in a “sweet spot,” highlighting the uncertainty that continues to drive investors toward safe-haven assets like Gold.
- Although inflation typically supports precious metals, the Fed’s current rate-hold strategy could temper near-term gains in Gold, as rising rates tend to weigh on non-yielding assets.
- Market participants now look ahead to the preliminary US S&P Global PMI data for May, due at 13:45 GMT, which will provide fresh insight into the state of business activity and economic sentiment.
Technical Outlook: Gold Holds Key Support Despite Resistance
Gold remains supported above its 20-day Exponential Moving Average (EMA), currently around $3,268, indicating a bullish short-term trend. However, the metal is struggling to decisively break above the ascending trendline resistance near $3,335, drawn from the December 12 high of $2,726.
The 14-day Relative Strength Index (RSI) remains neutral, oscillating within the 40–60 range, signaling indecision among traders.
On the upside, immediate resistance lies at the May 7 high near $3,440. A break above this level could open the path toward further gains. On the downside, initial support is seen at the May 15 low around $3,120, a key zone for bullish momentum to remain intact.
