Gold price is struggling to surpass $3,400 after testing this level earlier, despite the Federal Reserve showing support for interest rate cuts this year. Fed officials, including Neel Kashkari and other members, have advocated for interest rate reductions, citing economic slowdown.
The CME FedWatch tool indicates a 25 basis points interest rate cut is almost fully priced in for the September policy meeting. Lower interest rates theoretically benefit non-yielding assets such as gold, increasing its appeal.
Tariffs And Safe Haven Demand
Concerns about tariffs from former US President Donald Trump could increase demand for safe-haven assets like gold. Trump recently mentioned potential tariffs on China for oil purchases from Russia and increased import duties on India.
Gold is trading near the upper boundary of a Symmetrical Triangle formation, suggesting an upward trend. The 14-day Relative Strength Index indicates market indecisiveness, while support and resistance levels are identified at $3,200 and $3,500, respectively.
The Federal Reserve’s role is to adjust interest rates to achieve price stability and full employment. Quantitative Easing and Quantitative Tightening are tools used during economic fluctuations, impacting the US Dollar’s value by altering the dollar flow in the economy.
Given the current date of August 7, 2025, we are watching gold press against the critical $3,400 level. The Federal Reserve’s dovish language is providing a tailwind, but the price has not yet secured a firm breakout. This suggests we should prepare for a potentially significant move in the coming weeks.
Economic Indicators And Market Dynamics
The Fed’s position is reinforced by the latest economic figures, with July’s Core PCE inflation dipping to 2.7% and the jobs report showing a modest addition of only 150,000 new payrolls. These signs of a cooling economy make the expected September rate cut, which markets have almost fully priced in, a near certainty. This environment is historically favorable for non-yielding assets, making long gold positions attractive.
Adding to this bullish sentiment are geopolitical tensions, particularly surrounding potential tariffs from the former president. We see this uncertainty as a reason to hold safe-haven assets, as any sudden trade shifts could spark market volatility. These external factors provide a floor for the gold price, even as it struggles at resistance.
From a derivatives standpoint, the Symmetrical Triangle formation points to a breakout, with the market coiling for its next move. We should consider buying call options with strike prices at or just above $3,400, such as the $3,450 or $3,500 strikes, expiring in late September or October to capture the Fed meeting’s impact. These options offer a defined-risk way to profit from a potential sharp upward move.
Looking back, we can draw parallels to the Fed’s policy pivot in mid-2019, which preceded a multi-month rally in gold prices. During that period, the shift from a hawkish to a dovish stance ignited a substantial uptrend. We believe a similar dynamic is unfolding now, setting the stage for a new leg up in the gold market.
However, the indecisive 14-day RSI warns us against over-leveraging before a confirmed breakout above $3,400. A prudent strategy would be to establish a small position now and add to it if gold closes decisively above this level for several consecutive days. Should the price instead break below the $3,200 support, it would signal that our bullish thesis needs re-evaluation.
