Gold holds strong as US-Japan deal calms markets but EU tariffs loom

Gold is holding firm as markets react to shifting global trade dynamics and policy risks. A new U.S.-Japan trade agreement has alleviated immediate concerns, resulting in a short-term decline in safe-haven demand. However, unresolved EU-US tensions and looming tariff threats continue to fuel uncertainty. At the same time, pressure on the Federal Reserve adds another layer of volatility. Despite these mixed signals, gold remains supported both fundamentally and technically.

US-Japan trade deal eases tensions, but EU tariff risks keep Gold supported

President Trump announced a "massive deal" with Japan on Wednesday. This agreement includes a reduced 15% reciprocal tariff on Japanese goods, down from a proposed 25%. It also promises $550 billion in Japanese investment in the U.S. economy. The deal opens new doors for American agricultural and automotive exports to Japan.

This agreement has calmed some immediate trade concerns. As a result, short-term safe-haven flows into gold have declined. However, markets remain on edge due to unresolved EU-US trade talks. A looming August 1 tariff deadline threatens to revive volatility. The European Union is preparing retaliatory measures in the event that the U.S. imposes new tariffs on EU imports. These tensions continue to strengthen gold's long-term appeal.

Additionally, the deal signals a broader shift in U.S. trade policy. By securing favourable terms with Japan, the U.S. is attempting to isolate the EU and gain leverage ahead of upcoming negotiations. This tactical move may reduce trade-related anxiety in the short term, but it also sets the stage for increased friction between Washington and Brussels. Investors are cautious, aware that a breakdown in EU-US talks could swiftly reignite demand for safe-haven assets, such as gold.

Gold builds bullish momentum with eyes on $4,000 resistance

The gold chart below shows a robust bullish structure. After spending several years consolidating within a wedge pattern, gold finally broke out in early 2023. This breakout above the $2,075 resistance marked a significant shift in market momentum. Following this breakout, prices began to rally within an Ascending Broadening Wedge. This pattern reflects strong buying interest and increasing market volatility.

Support levels have continued to rise steadily. Key zones now include $2,790 and $3,000, both of which have acted as solid floors for price action. Gold has consistently held above these levels, reinforcing its strength as a technical support level. The metal is currently trading near $3,380, after briefly testing the $3,500 mark, which was an initial target within the wedge. Price action suggests that gold is building a base for the next upward leg.

The overall chart pattern points to a potential upside target in the $3,800–$4,000 range. This projection aligns with the upper boundary of the broadening wedge. A confirmed breakout above $3,500, supported by trading volume, would likely trigger this rally. With a weakening U.S. Dollar and growing macroeconomic uncertainty, the bullish case remains strong. As long as gold holds above the $3,000–$2,790 zone, the technical outlook remains favourable for further gains.

Conclusion

Gold continues to trade with strength as markets weigh shifting trade dynamics and rising policy uncertainty. The recent U.S.-Japan deal has provided temporary relief, but unresolved EU-US tensions and pressure on the Federal Reserve keep investors cautious. Technical signals remain bullish, with gold holding key support levels and poised to move higher. As long as risks stay elevated and the dollar remains under pressure, gold is likely to extend its upward momentum.

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