- Gold price drifts lower for the second straight day and is pressured by a combination of factors.
- The optimism around the EU’s tariff delay and a modest USD rebound undermines the commodity.
- US fiscal concerns and Fed rate cut bets should cap the USD and limit losses for the XAU/USD pair.
Gold price (XAU/USD) adds to the previous day’s modest losses and attracts heavy follow-through selling on Tuesday. Against the backdrop of the optimism led by US President Donald Trump’s decision to delay imposing tariffs on the European Union (EU), a modest US Dollar (USD) uptick is seen as a key factor driving flows away from the commodity. That said, a combination of factors warrants some caution before positioning for an extension of the ongoing corrective pullback from over a two-week high touched last Friday.
Investors remain on edge amid the uncertainty around Trump’s trade policies, worries about the worsening US fiscal situation, and persistent geopolitical risks. Moreover, bets that the Federal Reserve (Fed) will lower borrowing costs further might cap any meaningful USD appreciation and act as a tailwind for the non-yielding Gold price. Traders might also opt to wait for this week’s important US macro releases and FOMC minutes on Wednesday. Hence, any subsequent slide might still be seen as a buying opportunity and remain limited.
Daily Digest Market Movers: Gold price is pressured by fading safe-haven demand, goodish USD rebound
- US President Donald Trump agreed on Sunday to postpone the proposed 50% tariffs on the European Union from June 1 until July 9. The announcement followed a call with EU President Ursula von der Leyen, who said that the bloc was ready to move quickly in trade talks with the US but needed more time to strike a deal.
- The development offered some relief to markets, though investors remain on edge amid the uncertainty surrounding Trump’s trade policies and deep-rooted tensions between the US and China – the world’s two largest economies. Apart from this, US fiscal concerns and geopolitical risks could lend support to the Gold price.
- Trump’s dubbed “Big, Beautiful Bill”, which would add an estimated $4 trillion to the federal primary deficit over the next decade, was passed in the lower house last week and will be voted on in the Senate this week. This fuels worries that the US budget deficit could worsen at a faster pace than previously expected.
- Meanwhile, signs of easing inflationary pressure in the US lifted market bets that the Federal Reserve will eventually step in to support economic growth. In fact, traders are pricing in the possibility of at least two 25 basis point Fed rate cuts by the year-end, which keeps the US Dollar depressed near the monthly low.
- Russia launched the largest aerial assault since its full-scale invasion of Ukraine in February 2022. In response, Trump said that he was considering new sanctions against Russia and called Russian President Vladimir Putin crazy. Moreover, the continuous Israeli strikes on Gaza keep the geopolitical risk in play.
- Traders now look forward to Tuesday’s US macro releases– Durable Goods Orders and the Conference Board’s Consumer Confidence Index. The focus, however, will be on FOMC minutes, due on Wednesday, which might offer some cues about the Fed’s rate-cut path and provide some impetus to the USD.
- This week’s US economic docket also features the release of the Prelim Q1 GDP and the Personal Consumption Expenditure (PCE) Price Index on Thursday and Friday, respectively. This, in turn, should infuse some volatility around the XAU/USD pair and allow traders to grab meaningful opportunities.
Gold price could test 100-period SMA on H4, trend-line support breakdown in play
From a technical perspective, the commodity currently flirts with short-term ascending trend-line support. Some follow-through selling and a break below the $3,300 round figure and the 100-period Simple Moving Average (SMA) on the 4-hour chart could make the Gold price vulnerable and pave the way for deeper losses.
On the flip side,, the $3,325-3,326 horizontal support beak point now seems to act as an immediate hurdle ahead of Friday’s swing higg, around the $3,366 area. A sustained strength beyond will be seen as a fresh trigger for bulls and allow the Gold price to reclaim the $3,400 mark. The next relevant hurdle is seen near the $3,430 region, above which the XAU/USD could surpass an intermediate resistance around the $3,465-3,470 zone and challenge the all-time peak, around the $3,500 psychological mark touched in April.
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.
