Gold (XAU/USD) hovered around the $3,300/oz level in Wednesday’s Asian session, as traders balanced a firmer U.S. Dollar (USD) against persistent geopolitical and fiscal uncertainties. The precious metal has struggled to build on recent gains and remains confined to a narrow range, suggesting investor caution ahead of key U.S. economic data and the FOMC meeting minutes.
Mixed Fundamentals Shape Gold’s Near-Term Path
The USD extended its recovery for a second straight session, underpinned by stronger-than-expected U.S. macroeconomic data released on Tuesday. This, alongside positive sentiment in equity markets, pressured the non-yielding yellow metal.
However, bullish momentum in the greenback remains tentative amid growing expectations of Federal Reserve rate cuts and rising concerns over U.S. fiscal stability, especially in light of President Donald Trump’s proposed “Big, Beautiful Bill.” The legislation, if passed, could significantly widen the budget deficit—potentially undermining long-term confidence in the dollar.
Key Data Highlights
Durable Goods Orders fell by 6.3% in April, better than the expected -7.9%, but a notable reversal from March’s revised +7.6% reading.
Core Durable Goods Orders (excluding transportation) rose 0.2%, signaling resilience in business investment.
U.S. Consumer Confidence surged in May to 98, up from 85.7 in April—the sharpest monthly increase in four years—fueled by improving economic and labor market sentiment after the U.S.-China trade truce.
Despite the upbeat data, Trump’s decision to postpone a 50% tariff hike on the European Union until July 9 provided a temporary reprieve for risk sentiment, weighing slightly on safe-haven demand for gold.
Geopolitical Risks and Fed Policy Remain Key Catalysts
Persistent geopolitical flashpoints are capping gold’s downside:
Russia’s renewed attacks on Ukraine and President Trump’s warning that “Putin is playing with fire”.
Unresolved Israeli-Hamas tensions, despite U.S.-backed ceasefire proposals.
At the same time, investors remain focused on Fed policy signals, with markets pricing in at least two 25-basis point rate cuts in 2025. This dovish outlook, reinforced by slowing inflation and ballooning fiscal deficits, continues to lend underlying support to gold.
The upcoming FOMC minutes, along with Q1 GDP revisions (Thursday) and the closely watched PCE Price Index (Friday), will likely shape the next directional move for both the USD and gold.
Technical Outlook: Watch the 200-SMA on H4
Gold’s near-term chart shows consolidation around $3,300, with the 200-period Simple Moving Average (SMA) on the 4-hour chart serving as a pivotal technical level. A sustained break above this level could reignite bullish momentum, while failure to hold may expose the metal to further pullbacks.
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