Gold (XAU/USD) continues to post modest gains, trading near weekly highs during early European hours on Wednesday. The yellow metal remains well supported by a confluence of macroeconomic and geopolitical factors, including fading optimism over U.S.-China trade negotiations, rising global tensions, and a weaker U.S. Dollar.
Investor sentiment took a hit after U.S. President Donald Trump reignited trade concerns, threatening to unilaterally impose new tariffs within two weeks—dampening hopes for a breakthrough following recent U.S.-China trade talks in London. At the same time, heightened geopolitical risks are driving safe-haven flows, propelling gold higher for a second consecutive session.
Supporting the rally further, U.S. inflation data released Wednesday showed consumer prices in May rose at a slower-than-expected pace. The annual headline Consumer Price Index (CPI) edged up to 2.4%, slightly below the forecast of 2.5%. The core CPI, excluding food and energy, held steady at 2.8%. The softer inflation print bolstered expectations that the Federal Reserve may resume its rate-cutting cycle in September. Markets now price in a 70% probability of a 25-basis-point cut, according to CME FedWatch. Consequently, U.S. Treasury yields declined and the dollar fell to its lowest level in a month—further reinforcing gold’s appeal as a non-yielding asset.
On the geopolitical front, tensions remain elevated. The U.S. ordered partial staff withdrawals from its Baghdad embassy and permitted military families to leave the Middle East amid growing security threats. This followed warnings from Iran’s Defense Minister Aziz Nasirzadeh, who threatened strikes on U.S. bases if hostilities break out over Iran’s nuclear program. Simultaneously, Russia intensified retaliatory strikes on Ukraine, including a concentrated drone attack on Kharkiv, the country’s second-largest city—keeping geopolitical risk firmly in play and supporting gold’s safe-haven narrative.
Looking ahead, traders will monitor Thursday’s U.S. Producer Price Index (PPI) and Initial Jobless Claims for further clues on the Fed’s policy trajectory. Nonetheless, the current macro environment continues to favor the upside for gold.
Technical Outlook:
From a technical perspective, gold’s rebound from the 200-period Simple Moving Average (SMA) and its break above the $3,348–$3,350 resistance zone reinforce a bullish bias. Positive momentum on daily and hourly indicators suggests further gains, with the next key resistance seen at the $3,400 mark. A sustained move above that level could open the door to a rally toward the $3,430–$3,435 area, with potential to revisit the all-time high near $3,500, last reached in April.
On the downside, initial support lies around the former resistance near $3,348–$3,350. Deeper pullbacks may find buying interest near the $3,322–$3,323 region, just above the $3,300 psychological level and the 200-period SMA on the 4-hour chart. A decisive break below this pivotal support could signal a short-term shift in bias in favor of the bears.
