Gold price bulls await breakout through short-term trading range hurdle near $3,370
- Gold price attracts some safe-haven flows amid persistent trade-related uncertainties.
- Mixed Fed rate cut cues keep the USD depressed and further benefit the XAU/USD pair.
- The range-bound price action warrants some caution before placing fresh bullish bets.
Gold price (XAU/USD) maintains its bid tone through the first half of the European session on Monday, though it struggles to capitalize on the strength and remains below a multi-week-old trading range hurdle. The US Dollar (USD) remains on the back foot below the monthly peak in Federal Reserve (Fed) Governor Christopher Waller's dovish comments last week, which, in turn, is seen lending support to the commodity. Apart from this, concerns about the potential economic fallout from US President Donald Trump's trade tariffs turn out to be another factor pushing the safe-haven precious metal higher for the second straight day.
Investors, however, seem convinced that the Fed would delay cutting interest rates in the wake of the evidence that the Trump administration's increasing import taxes are passing through to consumer prices. This, in turn, could act as a tailwind for the USD and hold back traders from placing aggressive bullish bets around the non-yielding Gold price. Hence, it will be prudent to wait for strong follow-through buying before positioning for any further appreciating move in the absence of any relevant market-moving economic releases from the US on Monday. Nevertheless, the fundamental backdrop seems tilted in favor of the XAU/USD bulls.
Daily Digest Market Movers: Gold price benefits from a softer USD and reviving safe-haven demand
- The uncertainty surrounding US President Donald Trump's erratic trade policies assisted the safe-haven Gold price to attract some buyers for the second straight day on Monday. Trump has outlined steep tariffs against several major economies, which are set to take effect from August 1. Moreover, a report suggested that Trump was considering a 15% to 20% levy on the European Union, even if a trade deal is reached.
- Federal Reserve Governor Christopher Waller last week backed the case for a July interest rate cut amid mounting risks to the economy and expectations that tariffs are likely to have a limited impact on inflation. This keeps the US Dollar on the defensive below a nearly one-month top touched last Thursday and further supports the precious metal. Traders, however, seem convinced that the Fed would wait until September.
- Moreover, the current market pricing indicates the possibility of two 25 basis point rate cuts by the year-end. Adding to this, Fed Chair Jerome Powell expects inflation to rise this summer in the wake of higher US tariffs. This is seen acting as a tailwind for the USD and capping gains for the XAU/USD pair.
- Meanwhile, data released on Friday showed that the University of Michigan’s US Consumer Sentiment Index unexpectedly rose to 61.8 in July. This pointed to an increasing optimism among consumers regarding the economic conditions, both current and future, which further helps limit USD losses.
- There isn't any relevant market-moving economic data due for release from the US on Monday, leaving the USD at the mercy of Fed rate-cut expectations. Apart from this, fresh trade-related developments could drive the commodity ahead of the global flash PMIs during the latter part of the week.
Gold price needs to breakout through a trading range hurdle near $3,370 for bulls to retain control
From a technical perspective, any subsequent move up is likely to face stiff resistance near the $3,365-3,366 region, or the top boundary of the short-term trading range. A convincing breakout through the said barrier would be seen as a key trigger for bulls and lift the Gold price to the $3,400 round figure. The positive momentum could extend further towards testing the next relevant hurdle near the $3,434-3,435 area.
On the flip side, the $3,325-3,322 region could offer some support ahead of the $3,300 round figure. Some follow-through selling below the $3,283-3,282 area should pave the way for deeper losses and drag the Gold price to the June swing low, around the $3,248-3,247 zone. Failure to defend the said support levels might shift the near-term bias in favor of bearish traders.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
