Gold rallies as market sniffs Fed pivt next year, US yields slip
- Gold is supported by falling US Treasury yields despite a firm US Dollar.
- Fed minutes show broad support for at least one rate cut in 2025.
- Trump targets BRICS-aligned nations with fresh 10% tariff warnings.
Gold price registers decent gains on Wednesday as US Treasury yields recede, even though the Greenback trades solidly against its peers. Trade developments continued to dictate the market’s direction, while the latest minutes indicate that officials are still considering a rate cut in 2025. At the time of writing, the XAU/USD trades at $3,312, up 0.31%.
The Fed’s minutes showed that most officials see a rate cut to the Fed funds rate this year as appropriate, while a couple are considering a reduction in July, if data evolves as expected.
The White House continues to deliver blows to minor and major trading partners, releasing the latest batch of letters to countries like the Philippines, Moldova, Algeria, Iraq, Libya, Brunei, and Sri Lanka. Duties were set at around 20% to 30% for the countries mentioned.
On Wednesday, the US President Donald Trump emphasized that he would apply 10% additional tariffs to countries aligning themselves with anti-American policies of the BRICS.
Data from the Chicago Board of Trade revealed that market players are eyeing 50 basis points (bps) of easing in 2025.
Daily digest market movers: Gold price surges as White House announces another tranche of letters
- Gold’s uptrend remains intact, as it remains above strong support near $3,250. The drop in US Treasury yields boosted the yellow metal. The US 10-year Treasury note yield drops six basis points to 4.342%. US real yields are also edging lower by six bps at 1.992%. The US Dollar Index (DXY), which tracks the Greenback’s performance against a basket of currencies, is flat at 97.51.
- FOMC Minutes showed that some Fed officials do not see a rate cut in 2025, citing that inflation pressures remain high, along with inflation expectations edging up and ongoing economic resilience. All participants viewed the current policy rate as appropriate. Participants agreed that stagflationary risks had diminished, though they remain elevated.
- Washington unveiled tariffs to the Philippines (20%), Moldova (25%), Algeria (30%), Iraq (30%), Libya (30%), Brunei (25%), Sri Lanka (30%), and lastly Brazil (50%).
- Trump once again criticized Federal Reserve Chair Jerome Powell, adding that the central bank needs to cut rates by at least 3%. He sent copper prices higher as he is threatening to impose a 50% duty on the red metal.
- Even though the XAU/USD remains pressured, the World Gold Council (WGC) announced that Gold ETFs drew the largest inflow in five years during the first half of 2025. “Gold ETFs recorded an inflow of $38 billion in the first half of 2025, with their collective holdings rising by 397.1 metric tons of Gold.” The total holdings by the end of June rose to 3,615.9 tons, the largest since August 2022.
- The PBoC revealed that it added 70,000 ounces, meaning that the central bank’s Gold reserves increased by 1.1 million ounces since purchases resumed last November.
XAU/USD technical outlook: Gold price clings above $3,300
Gold price upward bias is intact, though it would be facing stiff resistance in the near-term. Although the Relative Strength Index (RSI) is aiming up, it remains bearish, an indication that clearing the 50-day Simple Moving Average (SMA) resistance level at $3,319 would be hard to accomplish. In that outcome, the next ceiling level would be the 20-day SMA at $3,345, $3,350 ahead of $3,400.
Conversely, if XAU/USD tumbles below $3,300, the first support would be the June 30 low of $3,246 to pave the way for further downside, with the 100-day Simple Moving Average (SMA) at $3,185 eyed, followed by the May 15 low of $3,120.
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
Christian Borjon Valencia
FXStreet
Christian Borjon began his career as a retail trader in 2010, mainly focused on technical analysis and strategies around it. He started as a swing trader, as he used to work in another industry unrelated to the financial markets.
