Gold prices have fallen by almost 0.8%, settling around $3,300. This drop is due to the strong performance of the US Dollar, which is now in demand as a safe haven. Traders are changing their expectations for interest rate cuts from the Federal Reserve, following better-than-expected US Nonfarm Payrolls data for June. The US Dollar Index, which compares the dollar to six major currencies, hit a weekly high of about 97.45. Market sentiment is cautious with the US tariff deadline approaching on July 9. Recently signed trade agreements with the UK, Vietnam, and a limited deal with China have brought some hope, but more negotiations are planned.

Gold Technical Analysis

Gold is currently near an upward trendline within an Ascending Triangle pattern, facing potential resistance around $3,500. If the price dips below the trendline, it may drop significantly. However, if it rises above $3,500, it could reach $3,550 or even $3,600. In 2022, central banks acquired 1,136 tonnes of gold, worth $70 billion, to add to their reserves. Gold typically moves inversely to the US Dollar and US Treasuries, making it a favored asset during economic instability. Still, its price is heavily influenced by the Dollar’s movements. This week’s decrease in gold prices mirrors a broader shift in market risk sentiment. The robust performance of the US labor market, highlighted by the latest June Nonfarm Payrolls, has led to a decline in expectations for future Fed rate cuts. As employment figures remain strong, the US Dollar has gained traction, attracting investors away from higher-risk assets. The Dollar Index rising to 97.45 shows that investors are realigning their portfolios. Many are moving into the Dollar to protect against uncertainties related to the upcoming US tariff decision on July 9. New trade agreements—especially with the UK, Vietnam, and China—have eased some worries. Still, caution remains until the outcomes of future negotiations are clearer.

Supply and Demand Factors

Gold’s recent price movements are closely tied to its relationship with the Dollar and US Treasuries. As prices edge closer to the trendline in the triangle pattern, the $3,300 level becomes crucial. If this level breaks down, downward momentum may build, with little support until much lower levels. On the other hand, if gold can close above $3,500, there is a clear upward path towards $3,550 and $3,600. Sovereign demand for gold remains strong. The acquisition of over 1,100 tonnes by central banks last year shows that many monetary authorities see gold as a reliable store of wealth. However, in the short term, traders are responding more to economic policy signals and the strength of the Dollar than to long-term accumulation. Given the current environment, it’s sensible to adjust positions with a focus on short-term opportunities. Volatility may stay elevated due to policy uncertainties and critical price levels being approached. Monitoring these key points while adjusting exposure seems like a more feasible approach until clarity emerges after the tariff deadline and subsequent economic data releases in the US. Create your live VT Markets account and start trading now.

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