Gold breaks above $3,430 as the US Dollar weakens

Gold breaks above $3,430 as the US Dollar weakens and trade talks between Washington and Brussels stall.

Gold continued its upward momentum for a second consecutive session on Tuesday, climbing over 0.9% to mark its highest levels in five weeks. The move came as U.S. Treasury yields extended their five-day decline and the U.S. dollar weakened across the board, fueling increased demand for safe-haven assets amid a backdrop of rising global uncertainty and jittery trade headlines.

At the time of writing, XAU/USD was trading near $3,427 after bouncing off earlier session lows at $3,383. The ongoing retreat in U.S. yields—particularly the benchmark 10-year Treasury falling to around 4.33%—has added pressure to the greenback, pushing the U.S. Dollar Index (DXY) down to the 97.40 region. In turn, gold prices found fresh support as market participants weighed the rising likelihood of geopolitical friction outpacing any near-term policy clarity.

Much of the latest bid behind gold appears to stem from escalating concerns surrounding U.S.-EU trade negotiations. With the White House's August 1 deadline looming for the imposition of a 30% tariff on EU exports, traders are bracing for a tense standoff. Reports suggest that EU diplomats are preparing a retaliatory package targeting up to €72 billion worth of U.S. goods—including automobiles, aviation, digital services, and bourbon—if no resolution is reached in time.

Adding another layer to the complex landscape, President Trump recently announced a new bilateral trade agreement with the Philippines that exempts U.S. imports from duties while subjecting Philippine goods to a 19% tariff. While the deal itself may not drastically impact global flows, it signals a broader push by the administration to score quick trade wins as it heads into a politically charged summer.

Meanwhile, the macroeconomic calendar remains relatively light this week. With little in the way of major U.S. data releases—aside from housing figures, jobless claims, and durable goods orders—markets remain hypersensitive to headlines, particularly around trade, inflation, and monetary policy.

The Federal Reserve, for its part, appears to be holding its ground. Market-implied odds via CME FedWatch currently suggest a 94% probability that the Fed will keep rates unchanged at the July 30 meeting, with only a 6% chance of a 25-basis-point cut. Despite a flurry of dovish remarks from individual Fed officials in recent weeks, consensus policy remains on the cautious side, especially as inflation has shown signs of acceleration while retail sales stay resilient.

From a technical perspective, the breakout above the descending resistance line connecting the May and June highs around the $3,420 level has revived bullish sentiment in the gold market. Should the momentum carry XAU/USD beyond the key resistance at $3,452—the June 16 high—attention could quickly shift toward the psychological $3,500 threshold.

Momentum indicators, particularly the Relative Strength Index (RSI), are trending higher, supporting the bullish case. However, failure to hold above $3,400 could expose initial support at $3,350, followed by the 20- and 50-day SMAs near $3,337 and $3,326 respectively, before the deeper level of $3,300 comes into play.

For now, gold seems to be feeding off the market’s unease with political unpredictability and trade fragmentation rather than macro fundamentals alone. As August approaches and tariff threats take center stage, the yellow metal remains a real-time barometer of investor sentiment in an increasingly noisy landscape.