Gold (XAU/USD) rose on Wednesday, bouncing back from a low of $3,358. This increase was aided by a weaker US Dollar and steady Treasury yields, with gold trading around $3,374. Although the metal is staying within its weekly range, it is struggling to break the $3,400 mark. The US Dollar hit a new weekly low, allowing Gold to maintain its four-day winning streak. There is growing anticipation for a rate cut from the Federal Reserve, adding to Gold’s strength. The market is cautious, reassessing the Fed’s monetary policies in light of recent economic data that raises questions about the economy’s stability. Ongoing global tariff tensions and expectations for rate cuts are also limiting Gold’s potential decline. Recent political changes at the Federal Reserve, marked by Fed Governor Adriana Kugler’s resignation, have sparked speculation about future monetary policies. President Trump’s choice to replace Kugler could affect Fed decisions, leading to increased market volatility, which often benefits Gold as a safe haven. The market is preparing for a potential rate cut in September, making Gold more attractive. US yields have edged up slightly, with the 10-year yield at 4.236%. The ISM Services PMI fell to 50.1, indicating slow growth in the services sector. Additionally, President Trump commented on trade tariffs affecting drugs and higher Indian tariffs related to Russian oil purchases. Gold prices have struggled to maintain upward momentum, remaining below $3,400. Previous support levels are now acting as resistance, but Gold is holding steady above the 50-day Simple Moving Average near $3,346. If prices drop further, they could test targets around $3,200 and $3,150. Current indicators show mixed trends, with an RSI at 52 suggesting uncertainty in the market. Historically, Gold is viewed as a safe investment, particularly during uncertain times. In 2022, central banks added 1,136 tonnes to their reserves, marking a record in purchases. Typically, Gold prices rise when the US Dollar weakens and fall when the dollar gains strength or markets improve. Gold often performs well during geopolitical unrest, recession fears, and low-interest rates. As of August 6th, 2025, Gold is facing challenges in breaking the important $3,400 resistance level. Currently, prices are supported by the 50-day Simple Moving Average around $3,346, creating a narrow trading channel. With the RSI at 52, traders should be careful about making large bets. Growing expectations for a Federal Reserve rate cut are becoming stronger, which could provide a safety net for Gold prices. Recent data from the CME FedWatch tool indicates a 75% chance of a 25-basis-point cut at the September meeting. Therefore, buying call options with strike prices just above $3,400 could allow traders to prepare for a potential breakout with lower risk. The uncertainty surrounding the Fed following Governor Kugler’s resignation is increasing market volatility. This situation, along with renewed tariff discussions, could cause significant price changes in Gold. Traders expecting a large price movement but unsure of the direction might consider using long straddles to benefit from the heightened volatility. This situation resembles conditions from late 2024, when similar Fed uncertainty and a weakening dollar led to higher Gold prices. The US Dollar Index has dipped to a weekly low of 101.50, and major gold ETFs have reported net inflows for five consecutive days. Until a clear price movement occurs, selling out-of-the-money put options below the strong $3,200 support level could be a way to earn some premium. However, it’s important to be aware of the downside risk if critical levels don’t hold. A significant drop below the $3,346 support could lead to a quicker decline toward the $3,200 psychological level. Traders should closely watch the 10-year Treasury yield, as a sustained rise above 4.25% could create challenges for Gold prices.

here to set up a live account on VT Markets now