Gold Drops to $3,340 as Strong Dollar, Fed Pause, and Trade Easing Pressure XAU/USD

Gold (XAU/USD) Under Pressure: Trade Deals, Strong Dollar, and ETF Flows Shift the Tide

Market Sentiment Turns Against Gold as Trade Fears Recede

Gold (XAU/USD) extended its decline to $3,340, down for a third consecutive session, pressured by improving global trade sentiment. The U.S. administration is finalizing multiple tariff agreements, including one recently signed with Japan and a pending pact with the EU, signaling a significant retreat from protectionist rhetoric. This has triggered risk-on sentiment in global equities while diminishing the need for traditional safe-haven assets like gold.

As the perception of trade war risk collapses, capital has rotated aggressively out of gold and into stocks. Equity indices such as the S&P 500 and Nasdaq hit fresh highs this week, drawing flows away from non-yielding assets. With investor anxiety cooling and risk appetite increasing, XAU/USD has struggled to maintain upward momentum.

Strong US Dollar and Sticky Rates Weigh on XAU/USD

The U.S. Dollar Index (DXY) surged to 97.70, marking a second day of gains as Fed rate expectations firm up. The Fed is now widely expected to hold the policy rate steady between 4.25% and 4.50% at the July 30 decision. Robust U.S. labor market data reinforced this outlook: unemployment claims fell for the sixth straight week to 217K, and the S&P Composite PMI climbed to 54.6, driven by services.

This economic resilience and the prospect of persistently high rates are deeply bearish for gold. Higher yields make fixed-income alternatives more attractive relative to gold, which offers no yield. Traders are increasingly betting on an extended Fed pause—reducing the urgency to hedge via XAU/USD.

Technical Breakdown Intensifies as Gold Loses Key Levels

Gold has lost critical short-term support, falling below its 20-day EMA near $3,355. Technically, this reinforces a bearish trend, especially after XAU/USD failed to break out of a symmetrical triangle dating back to April. RSI is trapped between 40 and 60, reflecting a lack of bullish conviction.

The immediate support rests at the May 29 low of $3,245. A break below that exposes the round-number level of $3,200, and then the May 15 low at $3,121. On the upside, resistance looms at $3,400, with stronger barriers at $3,438 and $3,500. Until the $3,500 ceiling is convincingly breached, the path of least resistance remains downward.

ETF Flows Reflect a Split Sentiment

Despite gold's decline, Bloomberg-tracked gold ETFs recorded inflows of 20 tons in just four sessions—primarily during Monday's spike. This suggests that institutional accumulation remains, but it is not strong enough to arrest the price drop. These flows appear to be defensive rebalancing rather than conviction buying, as risk-on sentiment continues to build across markets.

Newmont (NYSE:NEM) Rallies on Earnings and Gold Sensitivity

Gold miner Newmont Corporation (NYSE:NEM) surged nearly 7% after it crushed earnings forecasts. Q2 earnings came in at $1.43 per share versus $1.31 expected, with revenue reaching $5.32 billion, driven by a 26.5% YoY jump in gold sales. The average realized gold price was $3,320 per ounce, a staggering $973 higher than Q2 2024.

Newmont produced 1.5 million ounces and posted a record $1.7 billion in free cash flow. The company announced a fresh $3 billion buyback—signaling long-term confidence in gold margins despite short-term price volatility. NEM has gained nearly 75% YTD, demonstrating the leverage miners have to the gold price, especially in a high-cost inflationary environment.

Macro Risks: Fed, Tariffs, and China’s Stimulus Dilemma

President Trump intensified pressure on the Fed during a public visit to its headquarters, demanding lower rates. However, data is not yet weak enough to justify a cut. Fed Governor Waller and Vice Chair Bowman—both Trump appointees—have signaled openness to easing, but only under clear signs of economic slowdown.

Meanwhile, China reported a record budget deficit of 5.25 trillion yuan (~$733 billion) in H1 2025, reflecting aggressive fiscal stimulus as U.S. tariffs hurt exports. The EU-China summit yielded no major breakthroughs, further clouding the global growth outlook. These factors add a layer of geopolitical risk that may limit further downside in XAU/USD.

Gold Futures (GC=F) Post 42% Y/Y Gain, But Weekly Momentum Fades

Gold futures (GC=F) opened at $3,372.10 Friday—flat from Thursday—but remain up 42.6% year-over-year, and 28% YTD. However, prices slipped $16 from the previous session. While historical performance supports the case for gold as a long-term inflation hedge, current momentum is fading.

Retail demand is still evident: Costco continues selling gold bars, silver, and platinum—an unusual but notable indicator of broad interest in physical metals. Still, as equities outperform and corporate earnings improve, gold's appeal as a short-term play is softening.

Key Levels to Watch on the XAU/USD Chart

August gold futures have strong resistance at $3,451.70 and $3,500. Support levels lie at $3,325, $3,314, and the crucial $3,300 floor. A break of that level exposes $3,282. Despite modest support from ETF flows and geopolitical jitters, bulls are losing steam. Wyckoff’s Market Rating has dropped to 6.5, indicating the bulls still have an edge—but it’s slipping.

Final Verdict on Gold (XAU/USD): Bearish Near-Term, Cautious Mid-Term

With the Fed on pause, the U.S. dollar regaining strength, equity markets hitting record highs, and trade tensions subsiding, gold has lost its primary short-term drivers. Technically vulnerable and facing macro headwinds, XAU/USD is in correction territory. Despite strong long-term fundamentals, the short-term view has turned clearly bearish.

Verdict: SELL XAU/USD into resistance at $3,400 with downside targets at $3,245 and $3,200. Longer-term investors should monitor Fed policy shifts and geopolitical flashpoints before re-entering.

That's TradingNEWS