Gold prices struggle amid Fed uncertainty and US-China trade optimism

Gold (XAUUSD) prices remain under pressure as traders digest fresh macroeconomic signals and shifting investor sentiment. Despite a surprise credit downgrade for the US government, gold has failed to gain strong traction. Instead, optimism over a 90-day US-China trade truce and weak US inflation data are shaping market expectations. The Federal Reserve's policy direction, combined with geopolitical uncertainty, continues to influence gold's short-term trajectory.

Limited Gold upside despite US rate cut bets and Dollar weakness

Gold is struggling to attract buyers amid improving risk appetite. The recent downgrade of the US sovereign credit rating to "Aa1" by Moody’s has had a limited impact. Instead, markets remain supported by the temporary US-China trade truce, which has revived risk-taking across global equities. This upbeat tone reduces the immediate appeal of gold.

Meanwhile, expectations for more rate cuts by the Federal Reserve in 2025 continue to rise. Traders are now pricing in at least two rate reductions, following weaker-than-expected US inflation and retail sales data. This typically weakens the US Dollar, which should support gold. However, that has not been the case.

Hawkish commentary from key Fed officials is further confusing the outlook. Raphael Bostic of the Atlanta Fed emphasized persistent inflation risks and hinted at possibly only one rate cut this year. John Williams from the New York Fed added that economic indicators are mixed, with the labor market appearing stable but uncertain signals emerging elsewhere.

Vice Chairman Philip Jefferson warned about inflation risks from tariffs, while Minneapolis Fed’s Neel Kashkari highlighted how policy uncertainty from trade issues is denting investor confidence. All of these mixed signals are creating confusion in the gold market.

Gold chart forms ascending broadening wedge as volatility builds

The gold chart below shows a clear ascending broadening wedge pattern. This pattern is typically a sign of increasing volatility, with higher highs and lower lows forming a widening structure. The price bounced from key support around the $3,140 level, as highlighted in the chart. This level held firm after a strong downward move, indicating the presence of buyers. The rebound suggests a short-term floor for gold, at least for now.

However, the price failed to make a new high and is now trading below a descending trend line from the recent peak. The orange dashed line on the chart marks this resistance zone. Unless gold breaks above this trend line, upward momentum may remain capped. Gold is still trading within the larger ascending channel. This keeps the broader bullish trend intact, but the lack of new highs raises caution.

Short-term support remains at the lower boundary of the wedge. A breakdown below this could open the door toward the $3,000 level or lower. On the flip side, a confirmed breakout above the descending resistance could trigger a new leg higher toward the $3,400–$3,500 zone.

Traders should also be wary of the narrowing triangle toward the end of the chart. This typically precedes a breakout — either up or down. With fundamentals not providing a clear bias, the technical picture suggests consolidation or a breakout soon.

Conclusion: Indecision dominates as Gold awaits catalyst for breakout

Gold continues to face pressure as market sentiment favors risk over safety. Traders remain cautious amid mixed signals from the Federal Reserve and ongoing geopolitical uncertainty. Despite weak inflation data and expectations of rate cuts, gold struggles to find solid footing. The technical setup shows key support holding, but resistance limits further upside. Unless gold breaks above the descending trend line, price action may stay range-bound. Overall, the short-term outlook suggests indecision, with a breakout likely as the next decisive move.

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