Gold faces downtrend risk despite support from inflation and geopolitics

Gold (XAUUSD) prices are holding steady as investors brace for key US economic data and ongoing trade talks. Traders are taking profits on short positions, while inflation fears and a stalled US Dollar rally are boosting gold’s appeal. Uncertainty around US-China negotiations and rising geopolitical tensions, including higher oil prices, are further supporting safe-haven demand. Despite a recent technical breakdown on the chart, broader macro risks may still trigger a sharp rebound.

Gold price outlook driven by inflation fears and trade talk uncertainty

Gold buyers are stepping in as traders begin to take profits from their short positions. Many investors are positioning themselves cautiously ahead of this week’s high-impact economic releases. With second-quarter US GDP data due, any signs of economic weakness could spark fresh demand for gold. Although moderate growth is expected, a softer reading may boost expectations of a Federal Reserve pause or even rate cuts. A dovish stance from the Fed could pressure the Dollar and support further upside in gold prices.

At the same time, investors are digesting mixed signals from ongoing US-China trade talks. The recent meeting in Stockholm ended without a breakthrough. However, negotiations are set to resume, keeping hopes of a truce alive. Even the possibility of a temporary trade agreement is lending some support to risk sentiment and commodities. Meanwhile, the US Dollar’s recent upward momentum has stalled, giving gold some breathing space. A weaker Dollar generally makes gold more attractive to foreign buyers, helping lift the metal in uncertain times.

Geopolitical concerns are also playing a significant role. Rising oil prices, driven by fears of new sanctions on Russia, are fueling inflation worries across global markets. In such an environment, gold regains its traditional appeal as a hedge against inflation. However, any upside for gold remains tentative, as strong US data or progress in trade agreements could reignite Dollar strength and cap gold’s rally. Traders are staying on edge, carefully navigating between optimism and caution.

Gold breaks critical support zone after triangle breakdown

The gold chart below shows a classic symmetrical triangle pattern, which has been forming since April. This pattern typically indicates market indecision, as price action narrows between higher lows and lower highs. Gold has been consolidating within this range, reflecting a battle between bulls and bears without a clear direction.

Several attempts were made to break above the triangle’s upper resistance, but each one failed. These repeated rejections, marked by red arrows on the chart, highlight strong selling pressure near the top of the formation. Meanwhile, a key support trendline rising from the March lows had provided a solid base. Gold respected this support several times, reinforcing its technical significance.

However, the recent move saw gold breaking below that support line, signaling potential weakness. This breakdown could indicate the start of a bearish phase, especially if price fails to reclaim the broken trendline. Traders are now watching the $3,300 level closely. A decisive break below this zone may pave the way toward $3,200 or even lower. Still, broader macro events such as a dovish surprise from the Fed or rising geopolitical tensions could quickly reverse the bearish setup and trigger a strong rebound.

Conclusion

Gold remains at a critical juncture as traders await clarity from upcoming US economic data and the Federal Reserve’s decision. The recent breakdown from the triangle pattern points to growing bearish momentum. However, inflation concerns, trade uncertainty, and geopolitical risks continue to support demand. If macro conditions shift, gold could quickly recover lost ground. Traders will stay alert and ready to react as key events unfold.

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