The Gold price (XAU/USD) advanced during the early European session on Tuesday, climbing toward a two-week high near $3,385. The precious metal extended gains as traders reacted to renewed political turbulence surrounding the Federal Reserve (Fed) and the growing likelihood of a US rate cut. 

Concerns about central bank independence were brought into sharp focus after the US President announced the dismissal of Fed Governor Lisa Cook, sparking unease among investors. Maverix-Global broker Mia Moore takes a closer look at the subject in this piece.

This development, coupled with speculation that the Fed may resume its monetary easing cycle, has underpinned safe-haven demand for Gold. Lower interest rates generally reduce the opportunity cost of holding non-yielding assets like Gold, reinforcing its appeal to investors seeking protection against both political and economic risks.

Fed Independence Concerns Drive Gold Higher

Markets reacted swiftly after the US President issued a letter on his Truth Social platform stating that Cook was being removed due to alleged false statements on mortgage applications. The decision marks a confrontation with the central bank’s policymaking structure, raising questions about the degree of political influence over the Fed.

For Gold traders, such uncertainty strengthens the case for holding hard assets in times of political risk. Analysts noted that Fed Chair Jerome Powell, speaking at the Jackson Hole symposium, emphasised that while inflation risks remain tilted to the upside, the labour market faces significant downside risks. 

He also signalled that a rate cut in September remains on the table, though no final decision has been taken.

Rate Cut Bets Fuel Precious Metal Demand

Expectations for a Fed rate cut have been steadily rising. According to the CME FedWatch Tool, markets are pricing in an 84.3% probability of at least a 25-basis-point cut at the upcoming September policy meeting, slightly lower than the 84.7% priced in the previous session but significantly above the 61.9% probability one month ago.

Dallas Fed President Lorie Logan added to the market debate on Monday, noting that the Fed has additional room to reduce its reserves and anticipates that banks will utilize its standing repo facility to ease potential liquidity pressures. Such comments reinforced the market’s perception that the Fed is preparing the ground for more accommodative policy.

Key US Data Ahead: Consumer Confidence, Durable Goods, and GDP

Looking ahead, the spotlight turns to upcoming US economic data releases. On Tuesday, the Conference Board’s Consumer Confidence Index and Durable Goods Orders will provide insights into the resilience of US household spending and business investment. Additionally, the Richmond Fed Manufacturing Index is scheduled for release.

Later in the week, the focus will intensify with second-quarter Gross Domestic Product (GDP) data and the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred measure of inflation. 

Stronger-than-expected GDP growth or hotter-than-anticipated PCE inflation readings could bolster the US Dollar (USD), potentially limiting Gold’s upside momentum given its status as a USD-denominated commodity. Conversely, weaker figures could further fuel expectations of policy easing, supporting continued strength in Gold.

Technical Analysis: Bullish Momentum Intact

From a technical perspective, Gold continues to trade with a positive outlook, with price action firmly above the 100-day Exponential Moving Average (EMA). The 14-day Relative Strength Index (RSI) stands at 55.0, comfortably above the neutral 50 level, signalling ongoing bullish momentum.

Resistance Levels

• The immediate resistance zone lies between $3,400–$3,410, coinciding with the psychological threshold, the upper Bollinger Band, and the August 8 high.
• A decisive break above this barrier could open the door toward $3,439, the July 23 high, and potentially extend further to the round figure $3,500, which also aligns with the April 22 high.

Support Levels

• Initial support rests at $3,325, the August 21 low.
• A breach below this level could trigger further downside toward $3,285, aligning with the lower Bollinger Band.
• The critical support to watch is at $3,270, marked by the 100-day EMA, which serves as a key contention level for medium-term trend direction.

Conclusion: Gold Retains Bullish Edge Amid Political and Economic Crosswinds

In summary, Gold’s rally toward a two-week high near $3,385 reflects the convergence of several key drivers: rising concerns over the Federal Reserve’s independence, expectations of an imminent US rate cut, and sustained safe-haven demand. With crucial US data releases looming, including Consumer Confidence, Durable Goods Orders, GDP, and PCE inflation, market participants will be closely monitoring whether these indicators confirm or challenge the current policy outlook.

Technically, Gold retains a bullish trajectory, with resistance levels at $3,410 and beyond offering potential upside targets. However, failure to hold above support at $3,325 and $3,270 could expose the metal to short-term pullbacks.