Gold clings to gains on trade uncertainty but US bond yields limit upside
- Gold price clings to modest gains as trade uncertainty supports demand for bullion.
- US 30-year bond yields rise to 4.889%, limiting gains for Gold.
- XAU/USD dips back below the 50-day SMA, with support firming at $3,300.
Gold (XAU/USD) is ticking up slightly on Thursday, benefiting from escalating global trade tensions as recent tariff announcements from US President Trump have rekindled investors' appetite for bullion as a traditional safe-haven asset.
At the time of writing, XAU/USD is trading near $3,325, with persistent tariff threats – the latest targets were Brazil and Copper products – underpinning the Gold price in the short term.
Recent US Jobless Claims data continued to reflect a resilient labour market. This report, published by the US Department of Labor, measures the number of individuals filing new and continuing claims for state unemployment benefits and can provide insights about US employment trends.
Initial Jobless Claims printed at 227,000, down from 233,000 a week earlier, and Continuing Claims at 1.965 million, below the 1.98 million estimate. These figures are important labor market indicators given the Federal Reserve's data-dependent policy. With the data solidifying expectations that the Federal Reserve would refrain from cutting rates in July, hawkish comments from St. Louis Fed President Alberto Musalem provided some support for the US Dollar, limiting the short-term upside move for Gold.
Daily Digest Market Movers: Gold climbs as Trump's tariffs trigger fresh safe-haven demand
- The minutes from the latest Federal Reserve policy meeting, released Wednesday, highlighted officials' concerns over persistent inflation risks stemming from tariffs. The minutes noted that "most participants noted the risk that tariffs could have more persistent effects on inflation," underscoring a cautious stance with a preference for clarity on economic outlook.
- Markets are currently assigning a 67.4% chance to a 25-basis-point interest rate cut by September, according to the CME FedWatch Tool. This year, the Fed has consistently held interest rates within a 4.25% to 4.50% range, supported by a resilient US labour market.
- Trade tensions have intensified after President Trump announced a significant 50% tariff on Copper imports, effective August 1, citing national security concerns. Trump declared via Truth Social, "America will, once again, build a DOMINANT Copper Industry." Brazil also faced fresh tariffs amid Trump's assertion that ongoing political proceedings against former Brazilian President Jair Bolsonaro are politically motivated. Further, Trump initiated a Section 301 investigation targeting Brazil’s digital trade policies.
- At a recent Cabinet meeting on Tuesday, Trump reinforced the firmness of the August 1 tariff implementation deadline, insisting, “Everybody has to pay. And the incentive is that they have the right to deal in the United States.” Additionally, Trump publicly criticized Fed Chair Jerome Powell, demanding his resignation via Truth Social and accusing him of politically motivated monetary policy: "Rates should have been cut months ago. The only reason they’re not is because Powell doesn’t want me to win.”
- Throughout the week, the US administration dispatched tariff-related letters to roughly 20 countries, including Japan and South Korea, outlining the fresh tariff rate.
Gold technical analysis: XAU/USD regains confidence above $3,300
Gold (XAU/USD) Daily chart
From a technical standpoint, Gold is edging lower after testing the upper bound of a symmetrical triangle pattern. Prices are pulling back from the 50-day Simple Moving Average (SMA) at $3,323, which now provides immediate resistance for XAU/USD price action. The 20-day Simple Moving Average (SMA) is forming an additional barrier of resistance at $3,344.
Key support lies at the psychological $3,300 mark and the 38.2% Fibonacci retracement level of April’s rally at $3,292. Additionally, the Relative Strength Index (RSI) hovering near neutral at 49 indicates indecision in the market. Meanwhile, immediate resistance is seen at the 20-day SMA of $3,344.
A decisive move below the crucial $3,300 level could open the door to additional downside pressure, targeting the 50% Fibonacci retracement zone and potentially further technical selling.
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%. If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank. If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure. Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
Author
Tammy Da Costa, CFTe®
FXStreet
Tammy is an economist and market analyst with a deep passion for financial markets, particularly commodities and geopolitics.
