Gold prices surged for a second consecutive session on Thursday, buoyed by weaker U.S. economic data and escalating geopolitical risks in the Middle East. The precious metal (XAU/USD) traded at $3,386 at the time of writing, inching closer to the psychologically significant $3,400 level.
The latest uptick in bullion comes amid heightened market expectations for interest rate cuts by the Federal Reserve, following back-to-back softer inflation reports and mounting signs of labor market fragility. U.S. jobless claims exceeded 240,000 for the second straight week, signaling potential cracks in employment resilience.
Fed Policy Outlook Shifts as Inflation, Labor Data Weaken
Markets are increasingly pricing in monetary easing as the impact of tariff expansions and global trade uncertainty filters through the U.S. economy. The Producer Price Index (PPI) for May showed a modest 0.1% month-on-month rise, undershooting expectations. Core PPI also cooled to 3.0% year-on-year from April’s 3.1%.
The softer inflation backdrop, combined with a cooling labor market, has pushed money market traders to price in approximately 51 basis points of rate cuts by year-end, according to data from Prime Market Terminal.
Geopolitical Pressures Intensify
Tensions in the Middle East further boosted safe-haven demand. ABC News reported that Israel is weighing direct military action against Iran, while U.S. Senior Advisor Steve Witkoff is set to meet with Iranian officials in Oman over the weekend. President Donald Trump acknowledged the heightened threat, warning that Israel may strike Iran in the coming days—a concern echoed by U.S. intelligence agencies, according to The Washington Post.
Trade Developments Add Complexity
Amid the geopolitical turmoil, there was a glimmer of diplomacy on the trade front. U.S. Commerce Secretary Howard Lutnick announced a preliminary trade framework agreement between the U.S. and China, pending final approval from President Trump and Chinese President Xi Jinping.
DXY and Yields Tumble, Boosting Bullion
The U.S. Dollar Index (DXY) fell 0.60% to 97.99, hitting a multi-year low of 97.60 as the greenback weakened broadly. Meanwhile, U.S. Treasury yields also declined, with the 10-year note falling five basis points to 4.367%. Real yields tracked the move, slipping to 2.097%, further enhancing gold’s appeal as a non-yielding asset.
Technical Outlook: Gold Eyes Fresh Highs
Gold’s chart setup remains bullish, with the yellow metal forming a pattern of higher highs and higher lows. A breakout above $3,400 could accelerate gains toward $3,450, with the record high of $3,500 emerging as the next key resistance.
The Relative Strength Index (RSI) supports further upside, having broken above recent peaks. On the downside, initial support lies at $3,300. A break below this level could expose the 50-day Simple Moving Average (SMA) at $3,275 and key support around the April 3 swing high of $3,167.
Looking Ahead
Market participants will closely watch Friday’s University of Michigan Consumer Sentiment report for June. The data could shape short-term direction in both the U.S. Dollar and gold ahead of next week’s critical Federal Reserve policy meeting on June 17–18.
