Gold prices are having a tough time breaking past $3,400, even though the Federal Reserve is leaning towards cutting interest rates this year. Fed officials, like Neel Kashkari and others, support these cuts due to signs of an economic slowdown. The CME FedWatch tool shows that a 25 basis point rate cut is almost guaranteed for the September meeting. Lower interest rates typically make non-yielding assets like gold more attractive.

Tariffs and Safe Haven Demand

Concerns about tariffs from former President Donald Trump could boost the demand for safe-haven assets like gold. Trump has mentioned potential tariffs on China regarding oil bought from Russia and raised import duties on India. Gold is currently near the top of a Symmetrical Triangle chart pattern, hinting at a possible upward trend. The 14-day Relative Strength Index suggests that the market is uncertain, with support and resistance levels set at $3,200 and $3,500. The Federal Reserve aims to regulate interest rates to maintain price stability and full employment. It uses tools like Quantitative Easing and Quantitative Tightening to manage economic changes, which can affect the value of the US Dollar by changing how dollars flow through the economy. As of August 7, 2025, we’re closely watching gold as it approaches the critical $3,400 level. The Fed’s cautious tone is helping, but the price has yet to make a strong breakout. This points to a significant movement ahead in the coming weeks.

Economic Indicators and Market Dynamics

Recent economic data backs the Fed’s position. Core PCE inflation fell to 2.7% in July, and the jobs report showed only 150,000 new jobs added. These signs of a slowing economy make the anticipated September rate cut seem almost certain. Historically, this environment is good for non-yielding assets, making buying gold appealing. Geopolitical tensions, especially regarding potential tariffs, add to the positive outlook for gold. This uncertainty encourages holding safe-haven assets, as sudden shifts in trade could lead to market instability. These factors help support gold prices, even as they test resistance levels. From a derivatives perspective, the Symmetrical Triangle pattern indicates a breakout may be coming. It might be smart to buy call options with strike prices just above $3,400, like the $3,450 or $3,500 options, expiring in late September or October, to take advantage of the Fed meeting’s effects. These options allow for limited risk while profiting from a possible sharp rise. Looking back, we can compare this situation to the Fed’s policy shift in mid-2019, which sparked a long rally in gold prices. At that time, the change from a hawkish to a dovish stance led to a significant price increase. We believe a similar situation could happen again, potentially driving gold prices higher. However, the uncertain 14-day RSI warns against taking on too much risk before a clear breakout above $3,400. A smart strategy could be to start with a small position now and increase it if gold closes firmly above this level for several days. If the price falls below the $3,200 support level, it would signal a need to rethink our bullish outlook. Create your live VT Markets account and start trading now.

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