Gold prices have declined for a second consecutive day, pressured by a combination of factors including renewed optimism about U.S. trade policies and a slight rebound in the U.S. dollar. This follows a rise in gold prices last week, which saw the precious metal reach a two-week high before beginning a pullback.
The latest drop in gold prices has been influenced by President Donald Trump’s decision to postpone tariffs on the European Union, combined with a moderate strengthening of the dollar. While concerns over the U.S. fiscal situation and expectations of Federal Reserve rate cuts are expected to limit the dollar’s upside, the future trajectory of gold prices remains sensitive to any changes in the Fed’s stance.
Impact of U.S. Tariff Delays and Dollar Rebound
On Sunday, Trump announced that the tariffs on the European Union, initially scheduled to take effect on June 1, would be delayed until July 9. This development, following talks with European Commission President Ursula von der Leyen, provided some relief to market participants, easing tensions surrounding U.S.-EU trade relations. However, uncertainty about U.S. trade policies, combined with ongoing geopolitical risks, continues to weigh on investor sentiment.
The U.S. fiscal situation remains a concern as well, with the House of Representatives recently passing a bill that could add $4 trillion to the federal deficit over the next decade. This has raised alarms about the potential for a more rapid deterioration of the U.S. budget deficit than previously anticipated.
Simultaneously, signs of easing inflation in the U.S. have led markets to anticipate further actions from the Federal Reserve to support economic growth. Traders expect the Fed to cut interest rates twice before the end of the year, each by 25 basis points, which has kept the U.S. dollar near its monthly lows.
Geopolitical Tensions and Gold’s Safe-Haven Appeal
Ongoing geopolitical tensions also continue to support gold as a safe-haven asset. Russia’s recent escalation in its airstrikes against Ukraine, along with rising tensions in Gaza due to Israeli airstrikes, have heightened concerns among investors. In response to the situation, Trump has hinted at the possibility of new sanctions against Russia, which could further stoke market uncertainty.
Given these risks, traders are focusing on upcoming U.S. economic data, including durable goods orders and the Consumer Confidence Index, both due on Tuesday. However, the main market focus will likely be on the Federal Open Market Committee (FOMC) meeting minutes, set to be released on Wednesday. These minutes may offer clues on the Fed’s rate cut trajectory, which could influence both the U.S. dollar and gold prices.
In addition, key economic releases later in the week, including the first-quarter GDP estimate on Thursday and the Personal Consumption Expenditures (PCE) price index on Friday, are expected to inject more volatility into the gold market, providing potential trading opportunities.
Technical Outlook: Key Support and Resistance Levels
From a technical standpoint, gold is approaching a critical support level near its short-term uptrend line. If prices fall below the $3,300 mark and break through the 100-period simple moving average (SMA) on the 4-hour chart, further declines could follow.
On the other hand, immediate support is expected near the $3,325–$3,326 level, with resistance at the previous week’s high of $3,366. A break above this resistance could trigger a fresh bullish move, pushing gold toward the $3,400 level. Further upside potential exists at the $3,430 resistance level, and surpassing this could pave the way for a move toward the $3,465–$3,470 range, possibly testing the April all-time high near $3,500.
As market participants await key economic data, the interplay between demand for the U.S. dollar and gold’s role as a safe-haven asset will likely determine the next phase for XAU/USD.
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