Gold drifts lower as US Dollar steadies, traders eye upcoming US economic data
- Gold retreats after failing to sustain gains above $3,350.
- A steady US Dollar and firmer Treasury yields cap bullion’s upside.
- Traders await US economic releases, including weekly Initial Jobless Claims, Existing Home Sales, and preliminary August PMIs for fresh monetary policy cues.
Gold (XAU/USD) edges lower on Thursday, retreating modestly after Wednesday’s sharp rebound from three-week lows, as the metal failed to clear technical resistance near $3,350. A steady US Dollar (USD) and firm Treasury yields are weighing on the precious metal, as traders digest the Federal Reserve’s (Fed) July meeting Minutes and position ahead of Fed Chair Jerome Powell’s remarks at the Jackson Hole symposium on Friday.
At the time of writing, XAU/USD is trading around $3,340 during the European session, having posted an intraday high of $3,352. The price action reflects a cautious consolidation, with traders reluctant to take fresh positions and keeping the metal confined within a narrow range.
Attention now turns to upcoming US economic releases, with weekly Initial Jobless Claims and the preliminary S&P Global Purchasing Managers' Index (PMI) surveys scheduled later on Thursday. These data points could offer fresh insight into the labor market and business activity, shaping near-term expectations for the Fed’s policy path.
The Fed Minutes, released Wednesday, revealed that most officials viewed inflation linked to US President Donald Trump’s newly imposed reciprocal tariffs as a greater risk than a cooling labor market. Policymakers noted that tariff effects may take time to filter through, as many businesses are expected to gradually pass higher costs on to consumers. Several participants also anticipated softer growth in the second half of the year as weaker income restrains household spending. While a few members argued for earlier rate cuts, the majority preferred to leave policy unchanged, with dissent coming from Governors Christopher Waller and Michelle Bowman. Looking ahead, officials stressed that the path of rate cuts will depend on incoming data and the persistence of tariff-driven inflation pressures.
Market movers: US Dollar steady, yields firm, Fed under pressure
- The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, is holding steady above 98.00, trading near 98.30, and just shy of the one-week high at 98.44 as traders priced out the risk of a surprise 50 basis points (bps) interest rate cut and trimmed expectations for a 25 bps move in September. According to the CME FedWatch Tool, markets now see an 81% probability of a quarter-point cut, down from nearly full pricing a week ago.
- US Treasury yields stabilize across the curve after edging lower in the last two days. The benchmark 10-year yield is at 4.310%, up 1.5 basis points, while the 30-year stands at 4.915%, higher by 1.7 basis points. The US 10-year TIPS yield is quoted at 1.951%, up about 1.6 basis points on the day.
- On Thursday, the United States (US) and European Union (EU) reached an agreement on a joint statement outlining a trade deal, with Washington reiterating a 15% tariff ceiling on most EU goods and signaling the auto levy could be lowered to 15% within weeks. Both sides also committed to addressing digital trade barriers.
- The US political landscape took a dramatic turn after US President Donald Trump publicly called for the resignation of Fed Governor Lisa Cook on Wednesday. Posting on his Truth Social platform, Trump accused Cook of mortgage fraud, amplifying allegations made by Federal Housing Finance Agency (FHFA) Director Bill Pulte, who urged the Department of Justice to investigate the matter. Trump has repeatedly pressed the Fed to cut rates, berating Powell as “stupid,” “a loser,” and other invectives while also criticizing the Board, raising fresh concerns over central bank independence.
- Fed Governor Lisa Cook pushed back against political pressure, saying she has “no intention of being pressured to step down” and will take any questions about her financial history seriously, stressing she is gathering accurate information to provide facts.
- Geopolitics in focus as Russia slammed Western negotiations that exclude Moscow as a "road to nowhere" amid continued discussions on Ukraine's security guarantees. At the same time, the US is planning for a potential Trump-brokered Putin-Zelenskyy summit.
- Thursday’s US data calendar also features July Existing Home Sales, with Initial Jobless Claims expected at 225K, previously 224K, along with the preliminary S&P Global PMIs for August, with Manufacturing forecast at 49.5, previously 49.8, and Services at 54.2, previously 55.7.
Technical analysis: XAU/USD retests $3,330 support as bullish momentum fades
Gold (XAU/USD) declines on Thursday after Wednesday’s sharp rebound that briefly lifted prices above the upper boundary of a falling wedge pattern on the 4-hour chart. The breakout attempt stalled at the 100-period Simple Moving Average (SMA) near $3,350, where sellers re-emerged.
Currently, the metal is retesting the upper wedge line, which closely aligns with the horizontal support zone around $3,330. This area has become the immediate battleground between bulls and bears.
The Relative Strength Index (RSI) has slipped back below the neutral 50 mark on the 4-hour chart, reflecting weakening upside momentum and highlighting that yesterday’s rebound was more corrective than a trend-changing move. A deeper slide toward the 40-42 region would reinforce bearish pressure, while a recovery back above 55-60 would be needed to tilt the bias back in favor of buyers.
The Moving Average Convergence Divergence (MACD) indicator’s lines are flattening near the zero axis, while the green histogram bars are contracting after a brief positive run. This suggests the bullish momentum from Wednesday’s rebound is fading. A rollover into negative territory would confirm renewed bearish momentum, particularly if the price loses the $3,330 floor.
Overall, the near-term outlook hinges on the $3,330 support zone. A sustained hold above this level would keep the wedge breakout intact and allow bulls to challenge higher resistance levels. Conversely, a decisive break below $3,330 would invalidate the breakout and expose downside targets at $3,310 and $3,300.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.