The price of gold (XAU/USD) hovered near its daily low as market participants adopted a cautious stance ahead of the crucial data. Some repositioning in anticipation of the report helped the U.S. dollar (USD) regain modest ground, dampening demand for the non-yielding precious metal. However, broader market uncertainty and persistent geopolitical risks limited further downside.
Dollar Strength Weighs on Gold, but Losses Remain Contained
The U.S. dollar’s overnight pullback showed little follow-through, with traders reluctant to make bold moves before the inflation data. The greenback’s modest recovery added slight pressure on gold, though broader concerns, including trade tensions and global conflicts, provided support for the safe-haven asset.
Adding to market jitters, a U.S. federal appeals court on Thursday temporarily reinstated tariffs imposed during former President Donald Trump’s administration, after a lower trade court had ruled them illegal just a day earlier. The decision reintroduces uncertainty in global trade dynamics, unsettling investor sentiment.
In a related development, The Wall Street Journal reported that the Trump team may invoke a legal provision allowing the reimposition of tariffs of up to 15% for a 150-day period—potentially escalating trade tensions further.
Geopolitical Concerns Support Safe-Haven Demand
Geopolitical tensions also continued to support gold. In Eastern Europe, the Kremlin stated Thursday that it had not yet received a response from Ukraine regarding a proposed round of peace talks in Istanbul. Meanwhile, in the Middle East, the White House reported that Israel had agreed to a U.S.-brokered ceasefire proposal. However, Hamas rejected the terms, maintaining regional instability.
Fed Policy Outlook Remains Unclear Ahead of PCE Data
The Federal Reserve’s future interest rate path remains uncertain. Although traders are pricing in at least two 25-basis-point rate cuts by year-end, recent comments from Fed officials suggest a more cautious approach.
Minutes from the Fed’s May policy meeting indicated that most members support a wait-and-see stance amid a murky economic outlook. Chicago Fed President Austan Goolsbee acknowledged that rate reductions could be back on the table if trade tensions ease. San Francisco Fed President Mary Daly suggested that two rate cuts this year would be reasonable, contingent on continued labor market strength and declining inflation. Meanwhile, Dallas Fed President Lorie Logan said the risks to inflation and employment are currently balanced, but the Fed remains ready to act if conditions shift.
Fed Chair Jerome Powell reinforced the data-dependent approach during a meeting with the President on Thursday, stressing that monetary policy decisions will be guided by upcoming economic indicators.
Outlook: Inflation Data Key to Gold’s Next Move
All eyes are now on Friday’s release of the PCE Price Index, which could significantly influence expectations around Fed policy. A higher-than-expected reading may strengthen the dollar and exert downward pressure on gold, while a softer print could boost the metal by reviving hopes for rate cuts.
Technical analysts note that if gold breaks below immediate support at $3,280, it could trigger a sharper intraday decline.
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