Gold prices (XAU/USD) reversed early losses on Thursday, stabilizing around the $3,361 level during the European session, as market participants weighed a complex mix of fundamental drivers. The yellow metal maintained a neutral tone, with modest US Dollar (USD) strength capping gains, while broader macroeconomic concerns lent underlying support.
The greenback saw a mild uptick, driven partly by foreign demand, yet its upward momentum remained constrained amid growing expectations of rate cuts from the Federal Reserve in 2025. Mounting US fiscal concerns—fueled by President Donald Trump’s expansive tax and spending package—also pressured the dollar and provided a cushion for gold, which typically benefits from lower interest rates and safe-haven flows.
Investor attention remains focused on two key upcoming events: the US Nonfarm Payrolls (NFP) report due Friday and an anticipated high-stakes conversation between President Trump and Chinese President Xi Jinping. Geopolitical tensions—ranging from ongoing Gaza violence to rising trade friction between the US and China—continue to elevate the risk premium for gold, limiting downside moves and deterring bearish bets.
Fundamentals: Weak US Data and Policy Risks Support Gold
Disappointing US economic indicators have reinforced dovish expectations for Fed policy. According to data from ADP, the US private sector added only 37,000 jobs in May, marking the weakest reading since March 2023 and falling well short of forecasts. Meanwhile, the ISM Services PMI contracted to 49.9 in May—the first contraction since mid-2024—adding to signs of a slowing economy.
US Treasury yields have also declined, with both the 2-year and 10-year notes falling to their lowest levels since May 9. Fed Chair Jerome Powell is under increasing pressure from President Trump to lower interest rates, as fiscal imbalances worsen and trade uncertainty clouds the outlook.
Additional headwinds include Trump’s new tariffs—doubling levies on steel and aluminum imports to 50%—which took effect Wednesday and have reignited trade war fears. Simultaneously, Trump’s remarks about tensions with Russia and the continuing war in Ukraine have reinforced gold’s status as a geopolitical hedge. The US also vetoed a fifth UN Security Council resolution calling for a ceasefire in Gaza, as Israeli airstrikes continue, killing nearly 100 people in 24 hours.
Related Topics:
