Gold (XAUUSD) Price Forecast: Will Fed Clarity Spark the Next Gold Breakout?

Gold Edges Lower as Federal Reserve Policy Uncertainty and Trump Tariff Threats Drive Weekly Volatility

Gold (XAU/USD) declined 0.17% this week, falling $5.570 to close at $3,350.095 despite significant fundamental developments around Federal Reserve policy and escalating trade tensions. The precious metal faced competing forces as strong U.S. economic data reduced rate cut urgency while geopolitical risks and policy uncertainty supported safe-haven demand.

Will Trump’s Tariff Strategy Reshape Inflation Expectations?

President Trump’s announcement of 30% tariffs on European Union and Mexican imports starting August 1 dominated headlines, initially sparking safe-haven flows before momentum faded. The EU called the proposed tariffs “unfair and disruptive” but extended suspension of countermeasures until early August, seeking negotiated resolution rather than immediate retaliation.

Trade policy remained fluid throughout the week. Trump reduced Indonesian tariffs to 19% from 32% and signaled progress with Vietnam, suggesting the administration may pursue bilateral agreements before implementing broader measures. June Consumer Price Index data already showed tariff-related inflation lifting costs of core goods including audio equipment and furnishings, raising questions about Federal Reserve policy response.

Federal Reserve Independence Under Fire as Policy Outlook Changes

Markets experienced sharp volatility when rumors emerged that Trump planned to remove Fed Chair Jerome Powell. While Trump later clarified “We’re not planning on doing it,” the episode highlighted ongoing tensions over central bank independence and policy direction.

Fed Governor Chris Waller struck a notably dovish tone, backing rate cuts and citing weakening private-sector labor data. However, inflation data complicated the outlook. Headline CPI rose 0.3% monthly to 2.7% annually, while core CPI matched estimates at 2.9% yearly. Producer Price Index remained flat, creating mixed signals for policymakers weighing tariff-driven price pressures against broader disinflationary trends.

Strong Economic Data Reduces Rate Cut Urgency

Robust U.S. economic indicators undermined aggressive easing expectations throughout the week. June retail sales surprised to the upside while initial jobless claims declined to three-month lows, reinforcing economic resilience. The data prompted markets to pare back rate cut expectations from 50 basis points to 45 basis points by year-end.

Dollar strength from solid fundamentals pressured gold as an alternative store of value. The Dollar Index gained 0.61% for the week, making bullion more expensive for international buyers while reducing the urgency for monetary accommodation.

Gold Outlook: Policy Uncertainty Supports Defensive Positioning

Fundamental crosscurrents suggest continued volatility ahead. Trade tensions provide ongoing safe-haven support while strong economic data reduces Fed dovishness. UBS commodity analyst Giovanni Staunovo noted that policy uncertainty and geopolitical risks continue underpinning gold’s defensive appeal.

The combination of tariff-driven inflation risks, Fed independence questions, and robust economic growth creates conflicting signals for monetary policy. Until clarity emerges on trade negotiations and Federal Reserve direction, gold likely remains supported by uncertainty premium despite reduced rate cut expectations contributing to the modest weekly decline.

Technically, XAU/USD holds a modest upside bias but lacks a clear catalyst in the short term. Immediate support is seen at the pivot level of $3,310.48.

A breakout above $3,451.53 would confirm bullish momentum and likely trigger fresh buying interest. Conversely, a move below $3,244.41 could shift the near-term tone bearish, increasing pressure on the downside.

Despite short-term indecision, the broader trend remains bullish. Gold continues to trade in a buy-the-dip environment, underpinned by strong long-term support at the 52-week moving average near $2,879.09.

More Information in our Economic Calendar.