Gold prices are falling for the third day in a row, nearing $3,340. This drop is influenced by easing global trade tensions, thanks to expected tariff agreements between the US and EU, and a recent trade deal between the US and Japan. These factors lower the demand for safe-haven assets like gold, which had previously risen due to trade concerns. Meanwhile, the US Dollar Index is climbing, reaching about 97.70. This increase makes gold more expensive compared to the stronger dollar.

Federal Reserve Interest Rate Announcement

Attention now shifts to the Federal Reserve’s upcoming announcement. It is expected to keep interest rates between 4.25% and 4.50%. This situation is tough for gold, as it is a non-yielding asset, especially with a strong dollar in play. On the technical side, gold is under selling pressure after failing to break the Symmetrical Triangle pattern, suggesting there may be volatility ahead. Important technical levels to note include the 20-day EMA around $3,355 and the low of $3,245 from May 29. The 14-day RSI shows current selling pressure. If the price drops below $3,245, it may target $3,200 and $3,121. If it rises above $3,500, resistance could be found at $3,550 and $3,600. Gold’s trend is driven by trade news, currency changes, and the Fed’s decisions. We think the current conditions indicate a potential further decline in gold prices. With Federal Reserve interest rates sitting between 5.25% and 5.50%, the highest in over 20 years, non-yielding assets are facing tough challenges. This makes strategies like buying put options or using bear call spreads appealing for traders expecting a continued drop.

Strength In The Currency Market

The strong currency market, with the U.S. Dollar Index recently above 104.5, adds more pressure. A stronger dollar makes gold pricier for foreign buyers, which typically reduces global demand and investment. This factor could help bearish options positions become profitable soon. However, we need to consider conflicting geopolitical signals. The recent announcement of major new tariffs on over $18 billion worth of Chinese goods might raise safe-haven demand, which contradicts the easing trade tensions. This uncertainty means that any short positions should be managed with clear risks, making spreads a wiser choice than outright short futures. Technical indicators show that the 14-day Relative Strength Index has dipped below 50, reflecting current selling pressure. Historically, periods of high interest rates, like those in the early 1980s under Chairman Volcker, have greatly limited gold’s potential for gains. We are watching for a potential drop below the recent support level of $2,280 as a sign of further bearish momentum. Create your live VT Markets account and start trading now.

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