Gold prices stayed firm due to a solid US Dollar following strong jobs data and uncertainty from new tariffs. XAU/USD trades slightly above $3,300, mainly unchanged. The US Labour Department reported jobless claims below estimates, showing economic strength, capping gold’s rise amid high US Treasury yields.
Federal Reserve Stance
Expectations for a Federal Reserve rate cut have diminished despite some officials advocating for reduced borrowing costs. Most Fed members expressed concerns over inflationary pressures, fearing further price hikes from tariffs. President Donald Trump imposed a 50% tariff on Brazil, stating the country hasn’t been favourable in trade relations, adding pressure on gold prices.
Gold ETFs showed substantial inflows with $38 billion received, reflecting increased interest. Speculation exists for a potential 50 basis points easing by 2025, affecting market sentiments. XAU/USD is capped by resistance levels near $3,345 with a possible decline if it falls below $3,300, exposing lower supports. Tariffs, intended to protect local industries, may drive long-term price increases and trigger trade wars.
Trump plans to focus on tariffs with Mexico, China, and Canada as leading exporters. Revenue from tariffs is intended to lower personal income taxes, reflecting the current administration’s economic strategy ahead of the 2024 elections.
We’ve observed a relatively subdued movement in gold, with XAU/USD fluctuating just above the $3,300 mark, unable to maintain momentum despite rising geopolitical and fiscal tensions. Strong US jobs data has kept the dollar buoyant, which in turn has weighed on bullion, restraining any meaningful upside. Initial jobless claims came in below analysts’ forecasts, reinforcing a picture of economic resilience. This strength makes it harder for gold to push higher, particularly as US Treasury yields remain elevated, offering better yield alternatives for investors.
Trade Dynamics
While a few within the Federal Reserve system continue to speak in favour of cutting borrowing rates to support the broader economy, the majority remain hesitant. Concerns stem not so much from domestic conditions as from the external pressure of fresh import tariffs. With inflation already a pressing worry for the Fed, the idea of easing appears, for the moment, parked. The fear is that heightened tariffs could reignite price pressures, particularly in goods-heavy sectors. These concerns aren’t trivial political posturing but are rooted in historical precedent.
Brazil has, for better or worse, found itself at the receiving end of a fresh 50% tariff. According to Trump, the country has fallen short in what he deems fair trade conduct. This isn’t just rhetoric; these measures—if continued or expanded—will feed directly into pricing mechanics across numerous commodities, of which gold is sensitive due to its role as a hedge.
It’s worth noting that flows into gold Exchange Traded Funds have seen a sharp uptick, amounting to around $38 billion. These inflows point to a reallocation towards perceived safe assets, raising questions: Are market participants concerned about policy uncertainty, inflation, or both? Timing matters, and if the market indeed anticipates a potential 50 basis point rate shift—though not expected until later next year—there’s a window in which the dollar could stabilise or soften, depending on incoming data.
From a technical angle, the resistance near $3,345 continues to act as a ceiling. Should XAU/USD drop below $3,300 decisively, it likely opens a path toward the next cluster of support levels below. These zones aren’t just numbers—they anchor sentiment and short-term strategy, particularly for those with leveraged positioning.
The trade stance toward Mexico, Canada, and China isn’t going away. Whether or not these tariffs are politically motivated is secondary to the immediate impact on supply chains, pricing power, and investor hedging. If tax revenues generated from tariffs are indeed redirected toward personal income tax cuts, the political narrative may gain traction—but markets will weigh whether such a move inflames deficits or stimulates consumption.
We will continue to monitor how these dynamics shape interest rate expectations, commodity flows, and the structure of hedging strategies. The path for derivatives markets in metals is going to be shaped, not only by direct economic indicators, but also by policy decisions that filter gradually but decisively through the system.
