Gold prices remained stable due to a strong US Dollar, supported by positive jobs data and uncertainty surrounding new tariffs. XAU/USD is trading just slightly above $3,300, showing little change. The US Labour Department reported jobless claims lower than expected, indicating economic strength, which limited gold’s rise amidst high US Treasury yields.

Federal Reserve Stance

Expectations for a Federal Reserve rate cut have decreased, despite some officials suggesting it. Most Fed members are worried about inflation and potential price hikes due to tariffs. President Donald Trump announced a 50% tariff on Brazil, claiming the country has not maintained fair trade practices, adding more pressure on gold prices. Gold ETFs have seen significant inflows, gaining $38 billion, which shows increased interest in gold. Speculation suggests a possible 50 basis points rate cut by 2025, impacting market sentiment. XAU/USD is facing resistance around $3,345, and could decline if it falls below $3,300, making lower support levels vulnerable. Tariffs meant to protect local industries might lead to long-term price increases and spark trade wars. Trump intends to focus on tariffs with Mexico, China, and Canada, seeing these countries as major exporters. Revenue from these tariffs is planned to reduce personal income taxes, reflecting the current administration’s economic strategy as the 2024 elections approach. Gold has experienced minimal movement lately, with XAU/USD hovering just above $3,300. Despite growing geopolitical and fiscal tensions, it struggles to gain momentum. Strong US job data supports the dollar, which in turn weighs on gold, hindering any significant upside. Initial jobless claims were lower than expected, reinforcing a sense of economic strength. This resilience makes it harder for gold to rise, especially with elevated US Treasury yields providing attractive alternatives for investors.

Trade Dynamics

While some within the Federal Reserve still push for lower borrowing rates to help the economy, most remain cautious. Their concerns mainly stem from the impact of new import tariffs rather than domestic conditions. With inflation already a concern, the idea of cutting rates is currently sidelined. There’s fear that increased tariffs could worsen price pressures, particularly in goods-heavy sectors. These worries are not merely political, but backed by historical trends. Brazil has recently faced a 50% tariff. Trump claims the country has not maintained fair trade practices. This isn’t just talk; these tariffs—if continued or expanded—will affect prices across many commodities, including gold, which is sensitive to such changes due to its role as a safe haven asset. Interestingly, gold Exchange Traded Funds have seen a significant increase, with inflows of around $38 billion. This reallocation towards safer assets raises questions: Are investors worried about policy uncertainty, inflation, or both? Timing is crucial, and if the market anticipates a potential 50 basis point rate cut—though not expected until later next year—there might be a chance for the dollar to stabilize or weaken, depending on new data. From a technical perspective, resistance near $3,345 is holding strong. If XAU/USD falls decisively below $3,300, it will likely lead to the next set of support levels coming into play. These levels are not just numbers; they heavily influence investor sentiment and short-term strategies, particularly for those with leveraged positions. The trade stance regarding Mexico, Canada, and China will continue to evolve. Whether these tariffs are politically motivated is less important than their immediate effects on supply chains, pricing power, and ways to hedge investments. If tariff revenue is redirected toward income tax cuts, the political narrative could gain strength—but markets will consider whether this move increases deficits or encourages spending. We will keep tracking how these factors influence interest rate expectations, commodity movements, and hedging strategies. The derivatives market for metals will be shaped not just by direct economic indicators, but also by policy choices that impact the system gradually yet significantly. Create your live VT Markets account and start trading now.

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