Gold (XAU/USD) is paring back intraday losses on Friday but remains subdued below the $3,400 mark after briefly touching a two-week high earlier in the day. A modest rebound in the US Dollar (USD), along with improving global risk sentiment, has triggered some profit-taking following gold’s recent upward run. Still, several underlying factors continue to offer support to the precious metal.
Risk appetite has returned to markets, with Asian equities extending their winning streak for a fifth session, eyeing the best weekly performance since June. This upbeat tone has somewhat reduced the immediate appeal for safe-haven assets like gold.
However, concerns linger. US President Donald Trump’s fresh round of tariff threats—this time targeting Indian imports for purchasing Russian oil—has added to the global trade tension narrative. With levies now totaling 50% and more tariffs expected on semiconductors and pharmaceuticals in the coming week, fears of a broader economic fallout continue to simmer, supporting gold’s underlying demand.
Additionally, the Federal Reserve’s policy outlook remains a major bullish factor for gold. Market participants are increasingly convinced that the Fed will resume its rate-cutting cycle in September. The CME FedWatch Tool shows a more than 90% probability of a 25 basis point cut at the next meeting, with expectations of two cuts before the year ends.
This belief is being reinforced by signs of a weakening US labor market. Initial Jobless Claims rose to 226,000 for the week ending August 2, the highest level since early July, following last Friday’s softer-than-expected Nonfarm Payrolls data. These developments continue to put downward pressure on the USD, offering indirect support to gold.
In a related political development, President Trump has nominated Stephen Miran, Chair of the Council of Economic Advisers, to replace Fed Governor Adriana Kugler. Trump is also reportedly considering four candidates to potentially replace Fed Chair Jerome Powell, adding a layer of uncertainty to future monetary policy direction.
Meanwhile, the People’s Bank of China extended its gold buying spree for the ninth straight month in July, reflecting sustained central bank demand that could offer long-term support to the metal.
Looking ahead, with no major US economic releases scheduled, market focus will shift to upcoming speeches from key FOMC officials, which may provide further clues on the Fed’s policy path and influence the near-term trajectory of XAU/USD.
