Gold Price Slides Amid Dollar’s Rise, Geopolitical Tensions Loom

Rate Cut Expectations and Fiscal Worries Could Limit USD Gains

Gold prices experienced a dip, reaching a one-week low of $3,300, influenced by a stronger U.S. dollar. Anticipation of Federal Reserve rate cuts and concerns over U.S. fiscal policy may curtail the dollar’s gains, even as geopolitical risks offer safe-haven support for gold.

Factors Influencing Gold Prices

The modest uptick in the U.S. Dollar’s demand has diverted investment away from gold. Yet, growing expectations of the Federal Reserve lowering interest rates later this year may prevent aggressive bets by USD bulls, indirectly supporting the precious metal.

Furthermore, anxieties regarding the potential impact of **President Donald Trump’s** tax cuts and spending bill on the nation’s debt could restrain gains for the USD. Market sentiment remains sensitive, particularly concerning **President Trump’s** trade policies and recent Israeli strikes in Yemen, which curb risk appetite and provide a floor for gold prices.

Market Analysis: Key Drivers

• The dollar’s slight gains at the start of the week are pressuring gold prices, though this downside is somewhat mitigated by other supportive factors.
• **President Trump’s** ‘One Big Beautiful Bill’ is projected to increase the national debt by $3.4 trillion over the next decade, exacerbating long-term fiscal challenges.
• Concerns persist regarding economic repercussions from **Trump’s** tariffs and dovish stances from the Federal Reserve, potentially limiting significant USD appreciation.

Adding to global economic uncertainty, starting July 7th, the U.S. will be delivering tariff letters and/or deals to various countries, according to **Trump’s** social media posts. Also, any country seen aligning with anti-American BRICS policies will face an additional 10% tariff, with no exceptions.

• Currently, investors are pricing in over a 70% likelihood that the U.S. central bank will reduce borrowing costs in September, with expectations of at least two 25 basis point rate cuts by the end of the year.
• The Israeli military launched strikes on Houthi targets in Yemeni ports and a power plant after repeated attacks on Israel, sustaining geopolitical risks and bolstering gold as a safe haven.

Analysts await the release of the FOMC minutes on Wednesday for further market direction. According to a recent Reuters poll, economists are divided on the timing of the Fed’s first rate cut, with some predicting it as early as July, while others foresee a later move.

Technical Outlook

Repeated failures to sustain momentum above the 100-period Simple Moving Average (SMA) on the 4-hour chart, coupled with a drop below $3,300, may signal further losses for gold. Should negative traction continue, the price might descend towards the $3,270 support zone, potentially reaching the $3,248-3,248 region.

Conversely, the $3,324-3,325 area presents immediate resistance, followed by the $3,342-3,343 zone. A breakthrough beyond the $3,352-3,355 area could propel gold prices higher, aiming to reclaim the $3,400 level.

US Dollar FAQs

The US Dollar (USD) is the official currency of the United States of America. It accounts for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.