Gold (XAU/USD) continues to trade under pressure on Thursday, slipping to a three-day low near the $3,370 level during early European hours. The precious metal is feeling the heat from improving global risk appetite, as investors shift away from safe-haven assets following the US-Japan trade agreement and positive signals on a potential US-European Union (EU) tariff deal.
The renewed optimism in global trade is driving flows into riskier assets, pulling gold prices lower for the second consecutive session. Adding to the downward pressure is a modest rebound in the US Dollar (USD), which is recovering slightly after dipping to multi-week lows. This bounce is contributing to gold’s pullback from its highest levels since June 16, touched just a day earlier.
Trade Developments Weigh on Bullion; Fed Uncertainty Limits Downside
Markets remain upbeat after US President Donald Trump confirmed a trade deal with Japan earlier this week. Further reports suggest the US and EU are nearing a 15% tariff agreement—moves that have boosted investor confidence and softened demand for gold as a safe-haven.
Still, uncertainty surrounding the Federal Reserve’s interest rate path and concerns over the central bank’s independence may limit any deeper losses in gold. Despite Trump’s persistent criticism of Fed Chair Jerome Powell and calls for lower borrowing costs, markets largely expect the Fed to hold rates steady in its upcoming July meeting.
That said, some policymakers—such as Fed Governor Chris Waller and Vice Chair for Supervision Michelle Bowman—have signaled support for a rate cut in the near term, potentially at the July 30 policy meeting. These dovish remarks are helping to cap gains in the USD and could offer underlying support to the non-yielding yellow metal.
Market Focus Shifts to PMI Data and ECB Decision
Looking ahead, traders are eyeing the release of global flash Purchasing Managers’ Index (PMI) data, which will offer a clearer view of economic momentum across key regions. The European Central Bank’s policy decision, due later in the day, is also expected to stir market volatility and influence gold’s next move.
In the US, Weekly Initial Jobless Claims and New Home Sales figures are scheduled for release, both of which could impact the USD and generate short-term trading opportunities in gold.
While gold remains vulnerable to improving sentiment and USD strength, the broader macroeconomic and policy uncertainty still favors a cautious stance, especially for aggressive traders.
