Gold continues to gain traction during the early European session on Wednesday, trading near a two-week high above $3,300. A confluence of macroeconomic and geopolitical factors is driving the bid, with market sentiment increasingly favoring the yellow metal amid a weaker U.S. Dollar and reviving safe-haven flows.
Weaker Dollar, Fed Easing Expectations Fuel Momentum
Investors are now pricing in further interest rate cuts from the Federal Reserve in 2025, driven by signs of moderating inflation and a deteriorating growth outlook. The shift in rate expectations, coupled with rising U.S. fiscal risks, has pushed the Dollar Index to a two-week low, offering solid support for gold.
Moody’s recent downgrade of the U.S. government’s sovereign credit rating has added pressure to the greenback, as has renewed scrutiny over a potential $3–5 trillion addition to the national debt stemming from President Trump’s proposed tax legislation. The political and fiscal backdrop is quickly becoming a tailwind for gold.
Geopolitical Tensions and Trade Frictions Reinforce Safe-Haven Appeal
Gold’s bid is further reinforced by renewed U.S.-China trade tensions. China has accused the U.S. of “unilateral bullying” over recent semiconductor restrictions, with the U.S. warning businesses against using Huawei’s Ascend AI chips. The rhetoric is intensifying, and Beijing’s response has put markets on edge.
Simultaneously, heightened Middle East risk adds another layer of geopolitical uncertainty. U.S. intelligence suggests that Israel may be preparing strikes on Iranian nuclear sites, a potential flashpoint that could send volatility—and gold—higher.
Fed Officials Sound the Alarm on Economic Uncertainty
U.S. Federal Reserve policymakers are voicing growing concern over the outlook:
Cleveland Fed President Beth Hammack sees rising stagflation risk, citing uncertainty from U.S. trade policies.
St. Louis Fed President Alberto Musalem notes that business and consumer hesitancy is clouding the growth picture.
Atlanta Fed President Raphael Bostic warned of an impending slowdown in economic activity and cautious consumer behavior.
These statements, combined with soft U.S. retail sales data and easing inflation indicators, strengthen the case for policy accommodation and support a bullish gold bias.
Technical Landscape: Bulls Eye $3,360–$3,365 Next
From a technical perspective, Tuesday’s breakout above the $3,250–$3,260 zone—which aligned with the 200-period SMA on the 4-hour chart—was a significant trigger. The follow-through move past $3,300 confirms a near-term bullish structure.
Momentum indicators on both hourly and daily charts support the case for a push towards the next resistance at $3,360–$3,365, with a potential extension toward the psychological $3,400 level if momentum persists.
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