Gold prices came under modest pressure on Thursday as the U.S. dollar staged a slight recovery, triggering fresh selling interest near the $3,385 per ounce level—just below the multi-week high reached earlier this week. Despite the dip, market analysts suggest that the broader outlook for gold remains bullish, supported by lingering geopolitical tensions, dovish Federal Reserve expectations, and concerns over U.S. fiscal stability.
At the time of reporting, spot gold (XAU/USD) was trading below the $3,385 level, retreating from Tuesday’s highs. The decline comes as the U.S. dollar gained limited strength following recent economic data, which slightly undermined demand for non-yielding assets like gold. However, analysts caution that the current macroeconomic environment continues to favor gold in the medium to long term.
Modest USD Recovery Weighs on Gold
The U.S. dollar’s modest rebound was driven in part by the Automatic Data Processing (ADP) employment report, which showed that the private sector added just 37,000 jobs in May—far below market expectations and the lowest since March 2023. Additionally, the Institute for Supply Management (ISM) reported that U.S. services sector activity unexpectedly contracted in May, with the Services PMI falling to 49.9 from 51.6 in April. This marked the first contraction in nearly a year.
Bond yields also declined in reaction to the data, with both the two-year and 10-year U.S. Treasury yields hitting their lowest levels since May 9. The weak employment and services figures have fueled expectations that the Federal Reserve may cut interest rates as early as September.
President Donald Trump added to the speculation by publicly urging Fed Chair Jerome Powell to lower rates in response to signs of economic deceleration. Despite this, the dollar held onto modest gains, capping gold’s upside momentum in the short term.
Geopolitical and Fiscal Risks Continue to Support Gold
While the dollar’s rebound weighed on gold, other factors continue to provide strong underlying support for the precious metal. A flare-up in trade tensions, escalating geopolitical risks, and worsening U.S. fiscal conditions are keeping investors on edge and sustaining demand for safe-haven assets.
On Wednesday, the U.S. officially implemented higher tariffs on steel and aluminum imports, doubling the rate from 25% to 50%. The move comes ahead of a highly anticipated conversation between President Trump and Chinese President Xi Jinping, raising fears of a renewed trade war between the world’s two largest economies.
Elsewhere, Trump confirmed that he had spoken with Russian President Vladimir Putin, who reportedly vowed retaliation following Ukrainian attacks on Russian bombers. Meanwhile, the United Nations Security Council failed once again to pass a resolution for a permanent ceasefire in Gaza after a U.S. veto—the fifth such action. Israeli airstrikes in Gaza have killed nearly 100 people in the past 24 hours, further heightening geopolitical risks and increasing the gold risk premium.
Fed Rate Cuts and Budget Concerns May Weaken USD Further
Market participants are also increasingly concerned about the long-term sustainability of the U.S. fiscal outlook. Trump’s flagship tax and spending proposal, which could widen the budget deficit significantly, is prompting caution among global investors. These fiscal concerns, coupled with expectations of a dovish pivot from the Fed, are seen as limiting any meaningful appreciation in the dollar—creating a favorable backdrop for gold.
Technical Analysis: Gold Bulls Eye Break Above $3,385
From a technical perspective, the recent breakout above the $3,324–$3,326 resistance zone signaled a bullish shift in sentiment. Momentum indicators on both daily and hourly charts remain in positive territory, suggesting that the path of least resistance for gold continues to tilt upward.
However, analysts advise caution. A sustained move above the $3,385 level is needed to confirm the next leg higher. If this breakout materializes, gold could target the psychologically important $3,400 mark, followed by the $3,433–$3,435 range. A push beyond these levels would open the door toward the $3,500 zone—the all-time high reached in April.
On the downside, initial support is seen at $3,355. Further weakness could bring gold back to the $3,326–$3,324 region, now seen as a key support level following the recent breakout. If selling pressure intensifies, the $3,300 threshold may come into play, with stronger support around $3,286–$3,285.
Looking Ahead
Market participants are now awaiting fresh clues from upcoming U.S. economic releases, including the weekly initial jobless claims and Friday’s Nonfarm Payrolls (NFP) report. Speeches from several Federal Open Market Committee (FOMC) members are also expected to provide additional insight into the central bank’s monetary policy stance.
For now, gold remains in a holding pattern, pressured by a modest dollar bounce but underpinned by a compelling mix of macroeconomic and geopolitical drivers. Traders and investors will be watching closely for a decisive move above the $3,385 barrier, which could trigger renewed bullish momentum toward fresh record highs.
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