As the Dollar Weakens and The Fed’s Uncertainty Increases, Gold Shines Brighter

Gold is gradually strengthening as the US economy grows less certain.   The US dollar is weakening, and President Trump and Federal Reserve Chair Jerome Powell are at odds over rate cuts, prompting investors to put more money into gold.

Gold (XAU/USD) is currently trading near $3,340, which is between its 20-day and 50-day moving averages.   The narrow technical range indicates that the market is cautiously bullish.   Even if global markets are still eager to take risks, gold remains remarkably strong as individuals lose faith in the dollar.

This change is caused by the Federal Reserve’s lack of decision-making.   Powell has not yet hinted at a rate cut, despite the fact that inflation is approaching the Fed’s 2% target.   President Trump has repeatedly chastised Powell for being overly cautious.  At the NATO meeting, Trump again questioned Powell’s leadership (source). The drama has piqued investors’ curiosity in upcoming statistics, such as the PCE inflation numbers, which are due out on Friday and might affect interest rates.

On the other hand, economic indicators such as consumer confidence and new home sales indicate to a declining economy. According to the CME FedWatch Tool, the Fed currently has a 68% chance of cutting interest rates in September.  This could be a major factor for gold prices to rise.

Gold prices are expected to follow the Fed’s policy moves in the coming months, as geopolitical risks are put on wait and macroeconomic reasons take center stage.   This is a period when investors should pay close attention to the charts and the news.

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