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Gold falls below $3,350 as markets react to June US CPI data and renewed tariff developments.
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Headline CPI rose to 2.7% year-over-year, while core CPI came in at 2.9%, just under the 3% forecast.
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XAU/USD remains under pressure on Tuesday, with bullish momentum struggling to break through resistance.
Gold (XAU/USD) is trading within a tight range on Tuesday after the latest U.S. Consumer Price Index (CPI) report dampened expectations of an imminent Federal Reserve rate cut. At the time of writing, the precious metal is hovering below the $3,350 level, with a modest uptick in risk sentiment and stronger U.S. Dollar limiting upside momentum.
The June CPI report showed headline inflation rising 2.7% year-over-year, in line with forecasts, while core CPI rose 2.9%, slightly below the 3% consensus but still well above the Fed’s 2% target. This data suggests inflation is easing at a slower pace than anticipated, leading markets to reassess the likelihood of policy easing in the near term.
Fed funds futures now price in a 59.9% probability of a rate cut in September — slightly lower than before the CPI release — as investors adjust to the prospect of a more patient Fed. This repricing pushed U.S. Treasury yields higher and lifted the U.S. Dollar, both of which weighed on XAU/USD.
Trade Tensions Add Geopolitical Support for Gold
- Gold also remains sensitive to rising global trade tensions. As the August 1 tariff deadline looms, U.S. President Donald Trump has announced new 30% tariffs on imports from both the European Union and Mexico. The European Commission responded with a statement expressing its willingness to continue negotiations but warned that it would implement “proportionate countermeasures” if necessary.
- Trump’s criticism of Mexico’s handling of the fentanyl crisis also sparked diplomatic friction, with Mexican President Claudia Sheinbaum responding sharply, accusing the U.S. of ignoring domestic drug sales issues. These developments have added layers of political uncertainty, prompting safe-haven demand for Gold amid fears of escalating global trade disputes.
- While easing trade tensions could weigh on the metal, the current wave of aggressive rhetoric and potential retaliatory measures continue to support buying interest on dips in XAU/USD, especially if geopolitical risks worsen in the lead-up to the August deadline.
Technical Outlook: Gold Struggles to Gain Traction Below $3,350
Technically, Gold remains under pressure, trading just below $3,350. The 20-day Simple Moving Average (SMA) offers near-term support around $3,337, followed by the 50-day SMA near $3,324 and the psychological level of $3,300.
Price action has recently broken out of a tightening triangle pattern, hinting at a bullish bias. However, a firm break above the $3,371 level — which aligns with the 23.6% Fibonacci retracement of the April rally — is needed to confirm upward continuation.
A clean move above $3,400 could expose the June high at $3,452 and set the stage for a retest of the record peak near $3,500. For now, however, momentum remains subdued, with the daily Relative Strength Index (RSI) hovering around 52, indicating a lack of strong directional conviction.
Until XAU/USD clears key resistance, gold may continue to consolidate, with geopolitical headlines and rate cut speculation likely to dictate short-term price direction.
