Gold (XAU/USD) remains under pressure during Friday’s Asian session, hovering below the $3,300 mark and staying close to its lowest level in over a month. The yellow metal continues to face resistance from a surging US Dollar, which has extended its winning streak to a seventh consecutive day, reaching its highest point since late May. The sustained strength in the dollar is largely driven by the Federal Reserve’s more hawkish tone, which has dampened near-term appetite for non-yielding assets like gold.
Adding to the market uncertainty, President Donald Trump signed an executive order imposing tariffs of up to 41% on key trading partners, escalating global trade tensions. At the same time, the latest round of US-China trade talks failed to produce a breakthrough, which has reignited safe-haven demand. However, investors remain cautious and are largely sidelined as they await the US Nonfarm Payrolls (NFP) data for July, due later today.
Key Drivers Impacting Gold Prices:
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Fed Holds Firm on Policy:
Fed Chair Jerome Powell indicated on Wednesday that it’s premature to speculate on a rate cut at the upcoming September meeting. He emphasized that the current monetary policy remains suitable to handle uncertainties around tariffs and inflation, signaling no urgency to ease rates. -
US Economy Shows Strength:
The Advance GDP report showed the US economy grew at an annualized pace of 3% in Q2, well above Q1’s 0.5% contraction. Additionally, the PCE Price Index, the Fed’s preferred inflation gauge, climbed to 2.6% in June. The core PCE (excluding food and energy) held steady at 2.8%, exceeding expectations and reinforcing the case for a delay in rate cuts. -
Trade Tensions Resurface:
Trump’s new tariffs are set to take effect on August 7, with countries that run a trade deficit with the US facing a minimum duty of 15%, while those with a surplus will see a 10% rate. Uncertainty surrounding US-China trade relations persists, as talks failed to deliver results. US Treasury Secretary Scott Bessent stated that any extension of the 90-day tariff truce would be at Trump’s discretion. -
Market Sentiment Cautious Before NFP:
Traders are holding off on significant gold positions ahead of the NFP report, which is expected to show a modest 110,000 job additions in July, down from 147,000 in June. The Unemployment Rate is forecast to rise slightly from 4.1% to 4.2%. Additionally, the ISM Manufacturing PMI is also due today, which could further move the US Dollar and impact bullion prices.
Despite geopolitical and macroeconomic support, gold remains vulnerable due to the broad USD strength. The metal is on track for its third straight weekly loss, and unless the NFP report significantly disappoints, the downside risk remains intact.
