Gold consolidates at pivotal area ahead of US economic data and Fed signals

Gold (XAU/USD) continues to be caught between fundamental pressures and technical signals. Recent political and economic developments have created uncertainty, making traders cautious about taking bold positions. After a strong rally last week, gold has slowed down, reflecting a wait-and-see approach ahead of crucial data and policy announcements.

Gold prices supported by weak Dollar and rate cut bets despite trade optimism

Fundamental drivers for gold remain mixed but slightly tilted in favor of the yellow metal. US President Donald Trump's decision to delay the 50% tariff on the European Union until July 9 sparked some trade optimism. This reduced immediate fears of a trade war, applying short-term downward pressure on safe-haven assets like gold. However, that optimism is being offset by mounting fiscal concerns in the US. Trump's recently passed spending bill could expand the federal deficit by $4 trillion over the next decade. This has reignited worries over the country's financial stability. These concerns tend to increase the long-term attractiveness of gold as a hedge against fiscal mismanagement.

Economic indicators continue to suggest a slowing US economy. Recent softer-than-expected readings in both the Consumer Price Index (CPI) and Producer Price Index (PPI) have increased the likelihood of interest rate cuts by the Federal Reserve. Traders are now pricing in at least two 25-basis-point cuts in 2025. Since gold is a non-yielding asset, a lower interest rate environment typically boosts its appeal to investors. In addition, geopolitical tensions remain high, particularly due to the ongoing war in Ukraine and the volatile situation in the Middle East. These conflicts support safe-haven demand and help limit deeper losses in gold despite occasional price corrections.

The weakness in the US Dollar also plays a key role in supporting gold prices. The greenback has been in a consistent downtrend for the past two weeks and has just hit a fresh monthly low. Since gold is priced in dollars, a weaker dollar makes it cheaper for foreign buyers and therefore boosts demand. Traders now await upcoming economic events for clearer direction. These include the FOMC meeting minutes and key US data releases such as Durable Goods Orders, GDP, and the PCE Price Index. Until these reports are released, the fundamental picture suggests that gold may find support on dips. However, it could face resistance in pushing significantly higher in the near term.

Gold consolidation at a pivotal area

The gold chart below shows a clear descending channel in its market trend. This pattern has existed since mid-April, guiding the price action with lower highs and lower lows. The price has recently reached the upper boundary of the descending channel, which has acted as a strong resistance in past attempts. Every time gold approached this level, sellers emerged and pushed prices lower, as highlighted by the orange circles on the chart.

Gold is once again testing this resistance around the $3,358 level. If history repeats, another pullback from this zone may occur unless strong bullish momentum breaks the trend. Support remains near the channel's lower boundary, which lies just above the $3,100 level. Previous bounces from this zone also reinforce its technical importance.

The dashed midline of the channel shows a key area of price equilibrium. Gold recently broke above it, suggesting short-term bullishness. However, the broader bearish trend remains intact unless the price decisively breaks out of the upper trend line.

Traders should watch for confirmation—a breakout above the descending channel with strong volume could signal the start of a new bullish leg. Alternatively, a rejection could lead to another dip toward the lower boundary.

Conclusion

Gold remains tight, caught between bullish fundamentals and bearish technicals. Trade optimism, a weakening dollar, and rate-cut expectations offer support. However, strong resistance at the upper boundary of the descending channel limits upside potential. Unless gold breaks out decisively, the broader downtrend may continue. Traders should stay alert for key economic data and watch price action near resistance for clearer signals.

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