Gold prices (XAU/USD) regained upward momentum on Friday, trading above the $3,300 mark during Asian hours after pulling back from a two-week high in the previous session. The precious metal continues to draw support from a confluence of risk factors, including deteriorating U.S. fiscal conditions, escalating U.S.-China trade tensions, and persistent geopolitical instability.
Investor appetite for the safe-haven asset was reinforced as concerns over the ballooning U.S. deficit resurfaced. The U.S. House of Representatives, controlled by Republicans, narrowly passed President Donald Trump’s ambitious tax-and-spending package on Thursday. Dubbed the “Big, Beautiful Bill,” the legislation is expected to add approximately $3.8 trillion to federal debt over the next decade, raising alarms about the long-term sustainability of government finances.
Adding to the bullish case for gold is renewed selling pressure on the U.S. Dollar, driven by growing market conviction that the Federal Reserve will lower interest rates at least twice in 2025. The prospect of lower borrowing costs reduces the opportunity cost of holding non-yielding assets like gold, fueling demand for the yellow metal.
While Thursday’s stronger-than-expected U.S. economic data initially buoyed the dollar, the reaction proved short-lived. Unemployment claims fell to 227,000, signaling resilience in the labor market, and S&P Global’s flash PMIs showed private sector activity rebounding in May. Both the Manufacturing and Services PMIs rose to 52.3—the highest in several months. However, these gains were overshadowed by broader macroeconomic concerns.
Geopolitical developments also provided a safety bid for gold. U.S. intelligence reports suggest Russian President Vladimir Putin remains confident in his position on Ukraine, potentially prolonging the conflict. Meanwhile, the killing of two Israeli diplomats on U.S. soil has added to the already tense global backdrop.
Market Outlook:
Gold is on track to log its best weekly performance in over a month, with the technical outlook continuing to favor the bulls. The recent retracement from highs found support just below the 23.6% Fibonacci retracement level of the current rally, indicating buyers are defending key levels.
Immediate support lies in the $3,260–$3,258 region, marked by the 38.2% Fibonacci level and the 200-period SMA on the 4-hour chart. A drop below this confluence could trigger further technical selling, with downside targets around $3,232 and potentially $3,200.
On the upside, the $3,320–$3,325 zone presents the next resistance, followed by the overnight high near $3,346. A break above this could propel prices toward the $3,363–$3,365 range, with a further push potentially targeting the psychological $3,400 barrier. Sustained strength above that level would reinforce the bullish trend and open the door to further gains.
Market participants now await U.S. New Home Sales data and speeches from Federal Reserve officials for additional cues. Broader risk sentiment and ongoing developments in global trade and geopolitics will also remain key drivers of gold price action in the sessions ahead.
