Gold prices are on the rise, heading towards $3,300, as equity markets such as the S&P 500 and Nasdaq reach new highs. Market participants are closely watching the US political arena, specifically the proposed tax reform bill intended for approval before the July 4 deadline, which poses risks to fiscal stability.

Despite the uncertainty stemming from the tax bill and potential for increased inflation, equity markets remain robust. The forthcoming Nonfarm Payrolls (NFP) report, scheduled for Thursday, is anticipated to influence monetary policy expectations, possibly affecting Gold demand and the strength of the US Dollar.

Gold Technical Analysis

Technical analysis of Gold shows that prices are confined between the 50% and 38.2% Fibonacci retracement levels. With current trading at $3,285, movements above $3,292 could alter short-term sentiment, while downside risks are suggested by the Relative Strength Index (RSI) approaching bearish momentum.

The US Dollar remains integral in global trade, with market dynamics heavily influenced by the Federal Reserve’s monetary policies. Interest rates, quantitative easing, and quantitative tightening are key factors that impact the Dollar’s valuation, with broader implications for Gold and other non-yielding assets.

With bullion trading firmly within a defined technical corridor, and edging ever closer to testing the $3,300 threshold, we must remain aware of how heightened optimism in equities could lead to rotational pressure across asset classes. After all, as the S&P 500 and Nasdaq notch new highs, allocations may favour risk-oriented assets, reducing flows into defensives like Gold—particularly if real yields begin to pick up pace.

Market Positioning and Analysis

There is a clear relationship here worth reflecting on. As long as markets continue pricing in economic resilience, even amid fiscal question marks, commodities sensitive to inflation and currency value will stay reactive. With the tax plan aiming for legislative clearance before early July, it carries fiscal implications that are not yet discounted. The budgetary footprint of the proposed cuts and reforms raises red flags among fixed-income desks, especially if additional issuance forces adjustments in rate expectations.

We anticipate a pivotal week leading into the Nonfarm Payrolls release, not only in terms of direction for the Greenback but also how traders assess the probability of future rate shifts. Soft labour data might strengthen bets on accommodation or a delayed tightening path, pushing Dollar-denominated assets higher in response. On the contrary, robust payroll figures would reinforce the Dollar again, limiting further strength in Gold and narrowing arbitrage in precious metals options.

From a charting perspective, $3,292 remains a visible short-term hurdle. Recent price action shows compression below this level, but a convincing break above it—particularly on volume—could prompt a shift in speculative stance, as this would suggest market participants are willing to front-load expectations into a higher inflation environment. Conversely, weakness following the payroll data could heighten downside volatility, especially if the RSI continues leaking lower. A fall back towards $3,265 or even deeper into the retracement zone wouldn’t be out of line.

Given how central the Federal Reserve remains in steering expectations, any hints from policymakers regarding the balance sheet or guidance on rate paths may override data, however. While the nominal rate matters, it’s the path of real interest rates that we find particularly instructive. Higher real yields typically dampen the appeal of non-income-generating assets, so responsiveness in precious metals during Fed commentary should be monitored closely.

Taking all these elements into account, our focus, for now, narrows to the reaction function around Thursday’s data, any new framing from the Fed, and how markets internalise fiscal risks tied to political outcomes. One-sided positioning presents opportunities, especially if volatility in the Dollar crosses picks up or if bond market signals disconnect from nominal equity trends.

Let’s not forget that liquidity remains somewhat constrained ahead of key data, and structural positioning in the derivatives space could magnify short-term moves. Timing around execution and confirmation of trend breaks will therefore carry more weight than usual.

Create your live VT Markets account and start trading now.