Gold (XAU/USD) is trading higher, crossing the $3,330 mark, but US trading is light today due to Independence Day. This thin liquidity may affect how Gold responds to shifts in risk sentiment. This week has seen an uptick in risk appetite, thanks to progress in US trade talks ahead of the July 9 deadline. However, uncertainty about tariffs has returned as President Trump discusses potential tariffs of 10% to 70% on various countries.

The Big Beautiful Bill

The “Big, Beautiful Bill” just passed by the House aims to extend tax cuts and tackle immigration issues, but many worry about fiscal sustainability. The bill raises the debt ceiling by $5 trillion, and the Congressional Budget Office (CBO) estimates it could add $3.3 trillion to the national deficit over the next ten years. Short-term gains in Gold are being held back by interest rate expectations. Even though employment data shows an addition of 147,000 jobs and unemployment dropping to 4.1%, market analysis suggests that XAU/USD is stabilizing with a possible breakout above $3,400. Key support is at $3,321, and resistance is at $3,350. The US Dollar plays a significant role here, affected heavily by the Federal Reserve’s policies. The Fed’s quantitative easing and tightening can significantly impact the Dollar’s value, influencing supply and demand in global markets. Earlier this week, Gold was rising, with XAU/USD surpassing $3,330 in thin trading conditions due to the holiday. With reduced market depth, even small orders can significantly influence prices. This doesn’t mean that the movement lacks a solid basis, but the market’s reactions to sentiment changes could be amplified. This rally has been tied to a renewed risk appetite, driven by progress in trade negotiations expected to conclude or possibly delay on July 9. However, this optimism started to fade towards the end of the week as Trump suggested steep new tariffs, ranging widely from 10% to 70%. While no new tariffs have been enacted, the scale of these proposals is enough to disrupt cross-border trade assumptions. A significant economic package passed through the US House, as described by the President. It aims to extend tax cuts and introduce new immigration measures. However, it comes at a high cost, raising the debt ceiling by $5 trillion, and according to the CBO, it could increase the federal deficit by $3.3 trillion over ten years.

Trading Analysis

For those of us monitoring closely, it’s clear that these fiscal developments could create uncertainty in the bond market. However, yields haven’t shifted dramatically, likely because investors are focused on monetary policy signals. The latest job figures show an addition of 147,000 jobs and a drop in unemployment to 4.1%, which seems solid. Still, markets aren’t expecting quick rate changes. There’s a prevailing belief that the Federal Reserve will proceed cautiously. On the charts, Gold seems to be stagnating, trading within a narrow range between $3,321 and $3,350. If prices edge higher with increased volume, we may see attention shift towards the $3,400 range, where a breakout could gain momentum. Until then, this sideways movement indicates buyers are uncertain about making strong commitments without clearer macroeconomic drivers. The US Dollar continues to be influential. Those of us in the derivatives market must remember that the Fed’s liquidity stance—whether injecting more through asset purchases or pulling back via balance sheet reduction—directly affects the Dollar. This, in turn, impacts commodities priced in dollars, especially Gold. Currently, markets are holding a neutral to slightly bearish view on the Dollar, which is somewhat supportive for metals. As we look ahead, there’s a lot to monitor. We’ll be setting alerts for US economic releases and geopolitical happenings, especially anything that could influence inflation expectations. The potential for volatility is rising, but without clarity on fiscal or monetary policy directions, strong conviction remains low. A flat positioning or option-based hedging might be the best approach to maintain flexibility without overcommitting to a single narrative. Create your live VT Markets account and start trading now.

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