Gold gains strength on inflation concerns, tariff pressure, and Fed caution

Gold (XAUUSD) demand is rising sharply as investors react to growing global risks. President Trump’s new tariff plans and strong inflation data have unsettled markets. The Federal Reserve’s signal to delay rate cuts adds to the uncertainty. These factors are pushing investors toward safe-haven assets, with gold emerging as the leading refuge. A weaker US Dollar and volatile economic outlook further support the metal.  As concerns about inflation deepen, gold remains a preferred hedge and a key focus for market participants.

Gold demand rises on tariffs, Fed policy signals, and inflation concerns

Gold remains strong as investors seek safety amid rising economic risks. President Donald Trump's aggressive tariff plans have sparked concerns about global inflation. His recent announcements include a 200% tariff on pharmaceuticals and a 50% tariff on copper. These moves have unsettled markets.  As a result, demand for safe-haven assets, such as gold, has surged. Investors worry that trade tensions could harm global growth and drive up prices.

The US Dollar pulled back slightly after touching its highest level since June 23.  This helped gold recover from a recent dip.  However, the broader view remains that the Federal Reserve will delay interest rate cuts. Strong inflation data from June supports this expectation.  Both headline and core CPI showed increases. Rising yields and Fed hawkishness usually weigh on gold, but current uncertainty keeps demand high. Investors appear cautious and prefer gold as a form of protection.

Fed officials remain divided but cautious. Boston Fed President Susan Collins and Dallas Fed President Lorie Logan stressed the need for tighter policy.  They warned that inflation could rise further due to the imposition of tariffs.  Both signalled no rush to cut rates.  Markets now expect the Fed to stay hawkish into late 2025.  This limits gold's upside but also highlights its role as a hedge against inflation.  With inflation risks growing and markets unstable, gold remains a preferred choice for defensive positioning.

Inverse head-and-shoulders pattern confirms bullish outlook for Gold

The gold chart below shows a strong bullish setup. From 2021 to 2024, gold formed an inverse head-and-shoulders pattern. The left shoulder emerged in mid-2021.  A more profound decline in 2022 created the head. The right shoulder developed in 2023.  This classic reversal pattern signals a shift from bearish to bullish momentum and often precedes significant upward moves.

Gold spent nearly three years consolidating below the $2,070–$2,100 resistance zone.  This range acted as a ceiling during that time.  However, a decisive breakout in early 2024 changed the market structure.  Gold pushed above resistance with substantial volume and momentum. The price quickly surged past $2,700, then $3,000, and now trades close to $3,340, reflecting strong investor confidence and institutional interest.

The chart highlights the pattern’s symmetry with red curves and upward arrows. The broad accumulation base from 2020 to 2024 adds further strength to the breakout.  That resistance zone now becomes a support level and may hold during future pullbacks. Based on the pattern’s height, technical projections suggest a possible move toward $3,800 or higher, aligning with the chart’s projected path.

Conclusion

Gold continues to benefit from a weaker risk tone, safe-haven demand, and a strong technical breakout. The market is reacting to concerns about inflation, rising tariffs, and the Fed's delayed rate cuts. The chart confirms a bullish structure, with gold having broken out of a multi-year consolidation phase.  As long as the macro backdrop remains uncertain and the Fed stays cautious, gold is likely to remain supported. The technical outlook also favours further upside, with $3,800 emerging as the next primary target if momentum holds.

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