Gold Price May Correct Lower Amid Fed’s Cautious Approach

Waiting for more Data

At its most recent meeting, the Federal Reserve held interest rates steady, signalling a cautious, wait-and-see approach despite mounting pressure from President Trump to implement rate cuts. Fed officials, facing uncertainty surrounding the administration’s new tariff policies, are opting to monitor economic performance—particularly labour market conditions—before making any policy shifts. While rising tariffs may fuel inflation, policymakers appear more focused on potential increases in unemployment.

Possible Scenarios for Interest Rate Cuts

July Rate Cut: The Fed may opt for a 25-basis-point cut at its July meeting if upcoming jobs data of May and June show a notable deterioration in the US labour market and a rise in unemployment.

September Rate Cut: Alternatively, the Fed might wait until the September meeting to have a better image of the US economy and assess the impact of tariffs following the expiration of President Trump’s 90-day grace period for trade negotiations. If no agreements are reached and tariffs take effect across broader trading partners, the Fed could respond with a more aggressive 50-basis-point cut.

Awaiting the Outcome of Trade Negotiations

President Trump recently hinted at a major upcoming trade deal, possibly with the United Kingdom. Meanwhile, negotiations with several Asian countries are progressing, though talks with the European Union remain uncertain. The EU has drafted plans to impose tariffs on certain US imports if no trade deal has been reached. As for China, members of the US administration have travelled to Switzerland for talks with their Chinese counterparts, a move welcomed by markets and one that has boosted risk appetite.

Gold Prices at a Turning Point

Gold prices rebounded yesterday from the low end of the current trading zone spanning between 3,357 and 3,500. However, today the price has broken below 3,357 signalling a potential correction, with a lower high forming at 3,435. This could open the door to further declines toward 3,140. A daily close below 3,140 would reinforce the bearish outlook, suggesting a possible move toward 2,955.

Levels to Watch in a Bullish Scenario

If gold manages to trade above 3,435 and closes today above 3,357, it suggests that the uptrend remains intact, with potential upside toward 3,500. A daily close above 3,500 would further confirm bullish momentum, possibly setting the stage for a move toward 3,600.

Gold price – Daily Chart

Chart Source: ADSS Platform