The gold price (XAU/USD) edged lower during the early Asian session on Tuesday, as renewed selling pressure re-emerged amid waning expectations for a near-term rate cut by the Federal Reserve (Fed). The yellow metal failed to build on Monday’s goodish rebound from a one-week low, just beneath the $3,300 mark, and continues to hover under a mild downward bias. 

Hawkish shifts in monetary policy outlooks, bolstered by inflationary concerns linked to US tariffs, are currently limiting the bullish momentum for the non-yielding asset. This insightful article by Aurudium offers a thorough breakdown and expert commentary on the topic.

Fed Rate Cut Bets Diminish, Capping XAU/USD Upside

One of the key headwinds facing gold prices this week stems from a diminishing probability of a Fed rate cut in July. Markets have repriced expectations following the release of more hawkish commentary from policymakers, who now appear inclined to maintain elevated interest rates for longer. 

A major driver behind this shift is the perception that the US’s reciprocal tariffs, extended to August 1 and targeting a range of Asian and African countries, could fuel domestic inflation.

With import taxes potentially lifting consumer prices, the Fed might be forced to adopt a more cautious stance and delay rate easing. This scenario has strengthened the US Dollar (USD), which hit a two-week high on Monday, applying additional downward pressure on gold, which offers no yield and competes with interest-bearing assets during times of higher rates.

US Tariffs Spark Trade Concerns but Offer Limited Gold Relief

While rate hike expectations act as a drag on XAU/USD, the growing anxiety surrounding the global economic impact of the US President’s tariffs offers some counterbalance. The “reciprocal tariff” strategy, coupled with the threat of an additional 10% tariff on nations cooperating with anti-American BRICS policies, has spooked investors.  

This has intensified risk aversion, as reflected in weaker global equities and a sea of red across major bourses.

However, the safe-haven flow into gold remains restrained, likely due to traders awaiting more clarity on the Federal Reserve’s next steps. A combination of hawkish monetary policy and geopolitical uncertainty presents a conflicting narrative that has left gold rangebound and vulnerable to technical resistance levels.

USD Weakness Emerges, Partially Cushioning XAU/USD Decline

Interestingly, despite the recent USD strength, some signs of fatigue among USD bulls have begun to surface. Mounting fiscal concerns in the US, combined with ambiguity about the true economic fallout from the US’s trade policies, have tempered aggressive dollar buying. This has offered partial support to gold, helping it resist a sharper drop below key levels.

Still, any sustained rebound in gold is likely to remain limited, especially in the absence of strong risk-off catalysts or clear dovish signals from the Fed. For now, the precious metal trades are in a consolidation phase, as traders await the release of the FOMC meeting minutes on Wednesday, a critical event that could reshape rate expectations and shift near-term directionality.

Technical Outlook: Gold Price Eyes $3,300 for Key Support

From a technical standpoint, the XAU/USD pair appears vulnerable as long as it remains below the 100-period Simple Moving Average (SMA) on the 4-hour chart. Monday’s attempted recovery was capped near the $3,347-$3,348 region, a crucial resistance aligned with the 100-SMA. A break above $3,360 would likely trigger a short-covering rally, opening the path toward the psychologically important $3,400 handle.

On the downside, the $3,300–$3,295 support zone continues to serve as a pivotal floor. A decisive move below this area could lead to a steeper sell-off, with the next horizontal support seen at $3,270. If bearish momentum persists, the fall could extend toward the June low of around $3,248-$3,247.

These technical levels will likely be tested depending on how the market digests the FOMC minutes and interprets the tone of the discussion around inflation, labor market health, and interest rates.

Conclusion: A Delicate Balance Between Fundamentals and Sentiment

The current drift lower in gold prices reflects the tug-of-war between hawkish Fed bets and heightened trade uncertainty. While the safe-haven appeal of gold is supported by risk-off themes, especially surrounding the US President‘s aggressive tariff policies, the dominant narrative remains tied to the Fed’s monetary stance.

Unless USD weakness gains traction or a risk-off wave intensifies globally, gold bulls may find it difficult to gain a firm footing above the $3,347 resistance. Conversely, a break below $3,295 could attract fresh sellers aiming for deeper technical targets. Traders are therefore urged to stay nimble and watch for Fed-driven cues, which will likely set the tone for gold’s next big move.