- Gold prices are expected to retract after peaking for about two weeks at the start of Thursday.
- Concerns regarding US fiscal policies and the potential reduction of Fed rates should cap USD gains, thereby supporting XAU/USD.
- Recent updates on US-China trade tensions and geopolitical risks are likely to further limit potential losses.
During the early European trading session, gold prices (XAU/USD) will show a slightly positive trend, pulling back from the $3,345-$3,346 range mentioned earlier on Thursday. The modest rise of the USD is a significant factor influencing the daytime declines of goods, though substantial weaknesses seem hard to pinpoint. There’s growing sentiment that the Federal Reserve may further reduce borrowing costs in 2025, while rising US deficits could limit USD strength.
Additionally, US financial worries have slowed the outlook for economic growth, leading to an increased appetite for riskier investments amid escalating US-China trade tensions. This trend can be observed in the overall weak performance of stock markets, which should help stabilize gold prices. Furthermore, prices remaining above $3,300 suggest a favorable path for the XAU/USD pair. Hence, any corrective declines might be viewed as buying opportunities, likely maintaining a safety net.
Daily Digest Market Mover: Gold Price Recedes Amid Modest US Dollar Bounce
- The Republican-majority U.S. House Rules Committee has moved forward with President Donald Trump’s expansive tax cuts and spending proposals, priming the agenda for House floor votes. The much-anticipated “one big and beautiful bill” could potentially increase the nation’s debt by around $3 trillion to $5 trillion.
- On Wednesday, a crucial auction of 2020 Treasury bonds displayed weak demand, raising fears that these tax and spending initiatives will exacerbate the US budget deficit more rapidly than expected, especially following Moody’s downgrade of the US sovereign credit rating last Friday.
- The US dollar is experiencing downward pressure due to these fiscal concerns. Moreover, ongoing efforts to tackle inflation and disappointing growth forecasts are contributing to a continued slide in the USD, with the Federal Reserve anticipated to lower interest rates further this year, limiting any quick recoveries from nearly two-week highs.
- In a separate development, China has accused the US of misusing export controls and breaching the Geneva trade agreement while issuing guidance to prevent US companies from employing Huawei’s Ascend AI chips. The Chinese Commerce Department referred to US tactics as “unilateral bullying and protectionism.”
- On the geopolitical landscape, Israeli forces are still attacking the Gaza Strip, obstructing much-needed food aid. Additionally, Trump has informed European leaders that Russian President Vladimir Putin is not inclined to conclude the war with Ukraine, believing he is making gains.
- Traders are now focusing on the upcoming Flash PMI reports for insights into global economic health. The US Economic Docket will also include the usual weekly initial unemployment claims and existing home sales data, which could influence precious metal prices alongside overall market sentiment.
Gold Prices May Draw Some Buyers in Bullish Setups; The $3,300 Mark is Crucial
From a technical perspective, the XAU/USD pair seems to be stabilizing above the 61.8% Fibonacci retracement level after its recent drop from its monthly peak. This follows this week’s breakout through the $3,250-$3,255 resistance zone, supporting bullish traders. Additionally, daily oscillators show strong momentum, indicating that the path of least resistance for gold prices remains favorable. It seems plausible that a move toward the next significant resistance level around $3,363-$3,365, with a view to reaching the $3,400 mark, could occur.
On the other hand, a breakdown in the $3,316-$3,315 range, or at the 61.8% Fibonacci retracement level, could protect the immediate downside, especially if it stays above the $3,300 mark. If prices dip below $3,285, fresh buying may emerge, which would limit a decline near the $3,255-$3,250 area. However, a decisive break below this could trigger technical selling, potentially pushing gold prices down to the $3,200 level.
