Before the U.S. trading session on Tuesday, spot gold continued its downward trend, dropping more than $50 during the day to reach $3290/ounce. The optimism surrounding Trump's decision to postpone tariffs on the EU, combined with the dollar's rebound from its monthly low, has put pressure on gold for the second consecutive day.
However, Fxstreet analyst Haresh Menghani pointed out that the uncertainty of Trump's trade policies, worsening U.S. fiscal conditions, and geopolitical conflict risks still support safe-haven gold. Additionally, the market expects the Federal Reserve to maintain an accommodative policy and further cut interest rates by 2025, which may limit the upside potential of the dollar, thus alleviating the downward pressure on gold. Therefore, investors who are aggressively bearish on gold need to remain cautious.
Last Sunday, Trump agreed to postpone the originally planned 50% reciprocal tariffs on the EU from June 1 to July 9. This move stemmed from his conversation with EU President Ursula von der Leyen, who stated that the EU is willing to accelerate trade negotiations with the U.S., but needs more time to reach an agreement. Although this progress eased market tensions, the volatility of Trump's trade policies still leaves investors on edge. Meanwhile, the U.S. fiscal crisis and geopolitical risks may continue to support gold prices.
The 'Beautiful Legislative Act' proposed by Trump is expected to increase the federal deficit by $4 trillion over the next decade. This bill passed in the House of Representatives last week and will be submitted to the Senate for a vote this week. The market is concerned that the pace of the U.S. budget deficit deterioration may exceed expectations. On the other hand, signs of easing inflationary pressure in the U.S. strengthen expectations for Federal Reserve intervention in the economy—currently, traders bet on at least two rate cuts (25 basis points each) before the end of the year, putting pressure on the dollar near its month-low.
Regarding the Russia-Ukraine conflict, Russia launched its largest airstrike since the full-scale operation began in February 2022. Trump responded by stating he is considering new sanctions against Russia and accused Russian President Putin of being 'crazy.' Additionally, Israel's ongoing airstrikes on Gaza continue to escalate geopolitical risks.
Market focus shifts to U.S. durable goods orders and the Conference Board Consumer Confidence Index on Tuesday, but the highlight will be the FOMC meeting minutes released on Thursday, which may provide clues about the Federal Reserve's interest rate cut path and influence the dollar's movement. Preliminary U.S. GDP for the first quarter and the Personal Consumption Expenditures (PCE) price index will also be released on Thursday and Friday, respectively, which are expected to trigger fluctuations in gold prices and create trading opportunities.
Menghani pointed out that from a technical perspective, gold prices are testing the support of the short-term upward trend line. If it continues to break below the 100-period moving average on the 4-hour chart (approximately $3289), it may open further downside potential. Conversely, the breakout point of the support at $3325-$3326 will become the primary resistance, and after breaking last Friday's high of $3366, bulls may push gold prices back to $3400. The next key resistance level is in the $3430 area, and a breakout could challenge the psychological level of $3500 set in April.