Gold Gains 1.91% as Dollar Weakness and Fed Pivot Hopes Drive XAU/USD
Gold prices rallied last week, with XAU/USD closing at $3,336.615, up 1.91% or $62.44, as dollar weakness, Federal Reserve rate cut expectations, and trade policy uncertainties fueled steady demand for precious metals. Traders found a favorable environment to hold gold as a hedge, with both fiscal and monetary policy drivers aligning to support the metal.
Dollar Weakness Drives XAU/USD Higher
Weekly US Dollar Index (DXY)
The U.S. dollar index dropped to its lowest since early 2022, providing a major lift to gold. The dollar fell 0.64% against the yen and 0.33% against the Swiss franc while the euro approached four-year highs. This currency weakness directly increased gold’s attractiveness for international buyers, amplifying purchasing power and reinforcing safe-haven demand.
Experts trade the markets with IC Markets
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spread
Traders pointed to market concerns about U.S. fiscal sustainability and potential trade disruptions, prompting broader dollar weakness. As the dollar retreated, gold’s floor moved higher, aligning with seasonal safe-haven flows and aligning well with technical support levels near $3,300.
Federal Reserve Rate Cut Bets Intensify
Rate cut bets strengthened sharply last week, with the CME FedWatch tool pricing a 91.5% probability of a September rate cut and markets pricing in 65 basis points of easing by year-end. Goldman Sachs revised its Fed outlook, now expecting three cuts instead of one, citing muted tariff impacts and labor market softening.
Lower rate expectations reduce the opportunity cost of holding gold, creating favorable positioning for traders anticipating further policy easing. President Trump added fuel by demanding lower rates, stating he would not appoint a Fed chair opposed to cuts and signaling rates should drop toward 1%.
Massive Spending Bill Raises Debt Hedging Demand
A $3.9 trillion fiscal spending bill advanced in Congress, adding $3.3 trillion to the national debt while making 2017 tax cuts permanent. Concerns about long-term debt sustainability strengthened gold’s role as a hedge, supporting bids as traders positioned for potential currency debasement risks tied to deficit expansion.
Trade Policy Uncertainty Supports Safe-Haven Demand
Trade policy developments added another bid under gold, with Trump’s 20% tariff on Vietnamese imports and ongoing India negotiations injecting uncertainty. A July 9 tariff deadline kept markets cautious, with fluctuating tariff threats between 10%-50% heightening gold’s appeal for traders hedging trade disruption risks.
Gold Prices Forecast
Weekly Gold (XAU/USD)
Gold’s 1.91% weekly gain reflects dollar weakness, heavy fiscal spending, and trade tensions supporting XAU/USD above $3,300. With the Fed rate cut now pushed to September, near-term focus shifts to the July 9 tariff deadline, keeping trade policy risks at the center of gold’s support.
Technically, last week’s rise ended a two-week slide but stopped short of a true bullish reversal. Sellers remain near $3,451.53 and $3,500.20, capping breakout potential. Meanwhile, value buyers are eyeing the $3,166.46–$3,018.52 retracement zone if trade developments trigger a pullback.
The broader uptrend remains intact, supported by the 52-week moving average at $2,842.67. Traders now face a clear choice: buy strength on a break above $3,451.53 if tariffs drive a safe-haven rush, or buy value on dips toward $3,166.46–$3,018.52 if volatility shakes out weaker hands.
For now, gold remains well-backed by fundamentals, but the tariff deadline will likely set the tone for gold’s next move this week, with traders positioning around these key levels as trade risks drive sentiment.
