XAUUSD Steadies as Traders Eye Fed Easing While USD Push Weakens

XAUUSD has broken the downtrend channel to the upside

#XAUUSD Analysis Video

Gold prices have inched higher after facing a dip earlier in the week, with traders cautiously watching upcoming US economic data for fresh cues. While the gains mark a partial recovery from recent losses, the momentum remains limited, and the market appears to be waiting for stronger signals before making any bold moves. Let’s break down what’s driving this situation and what factors are keeping gold in check.

Why Gold Is Struggling to Find Direction

Gold has managed to pick up slightly in the Asian trading session, reversing part of the previous day’s drop to a two-week low. The main reason behind this modest rebound is the pullback in the US dollar. After a strong surge earlier in the week—triggered by better-than-expected US Producer Price Index (PPI) data—the dollar is now facing selling pressure.

The PPI report showed that US producer inflation rose more than anticipated, making markets rethink how quickly the Federal Reserve might cut interest rates. Initially, this boosted the dollar and weighed on gold, but traders seem convinced that rate cuts are still likely in September. This softer dollar tone has helped gold regain some ground, as lower interest rates tend to support non-yielding assets like gold.

However, there’s still a cautious tone in the market. Even with expectations of Fed rate cuts, fresh concerns about inflation have slowed down hopes for aggressive monetary easing. On top of that, a positive global market mood—fueled by easing trade tensions and hopes for diplomatic progress in conflicts—has reduced the demand for safe-haven assets like gold.

What’s Driving the Current Market Mood

1. Fed Rate Cut Speculation

The main talking point among traders right now is whether the Fed will deliver a rate cut in September. The CME Group’s FedWatch Tool shows a high probability—around 90%—of at least one rate cut by then, with the possibility of two cuts before year-end. While this outlook supports gold, the market is not rushing to buy, preferring to wait for confirmation from upcoming economic data.

2. Cooling US Dollar Rally

Earlier this week, the US dollar jumped sharply after the PPI data release, hitting gold hard. But as traders digest the numbers and focus on the rate cut possibility, the dollar’s momentum has weakened. A softer dollar generally makes gold more attractive to non-US buyers, and this is one of the reasons gold prices have ticked up again.

XAUUSD is moving in a box pattern

3. Global Sentiment Boost

Markets have been feeling slightly more optimistic in recent days. The extension of the US-China tariff truce for another three months has helped calm fears of a major trade war. At the same time, upcoming talks between the US and Russia have raised hopes for progress in resolving the war in Ukraine. This combination of easing geopolitical tensions and positive risk sentiment has made investors less eager to rush into safe-haven assets like gold, limiting its gains.

The Key Data Traders Are Watching Next

The next big moves for gold could be triggered by fresh US economic data due before the weekend. Traders will be keeping an eye on:

Monthly Retail Sales Figures – A strong reading could boost the US dollar and weigh on gold, while weaker numbers might do the opposite.
Empire State Manufacturing Index – This will provide insights into the health of the manufacturing sector, which can influence overall economic sentiment.
University of Michigan Consumer Sentiment & Inflation Expectations – These numbers can shift rate cut expectations and directly impact the dollar and gold prices.

If these reports point towards slowing economic growth or softer inflation pressures, gold could see more support. On the other hand, if the data signals strength in the US economy, it could limit gold’s upside in the short term.

Is Gold’s Downtrend Over?

Despite the slight recovery, gold is still on track to post its first weekly loss in three weeks. The lack of strong follow-through buying suggests that investors are still wary. Many see the recent uptick as a temporary rebound rather than the start of a sustained rally.

Without a clear catalyst, gold could remain range-bound, and any sharp upward moves might quickly run out of steam. This cautious approach is understandable, given that traders are balancing the potential for lower interest rates against lingering inflation concerns and improving global sentiment.

XAUUSD is moving in an Ascending Triangle pattern

Final Summary

Gold prices have managed a mild rebound after hitting a two-week low, helped by a softer US dollar and expectations of a September Fed rate cut. However, gains remain capped by fresh inflation concerns, an upbeat global market mood, and a lack of aggressive buying.

The next major test will come from upcoming US economic data, which could either strengthen the case for rate cuts and support gold or boost the dollar and push gold lower. For now, the market remains in a wait-and-see mode, with traders looking for clearer signals before committing to bigger moves.

If upcoming data confirms economic softness and keeps rate cut expectations high, gold could find more room to rise. But until then, the yellow metal’s path looks uncertain, and any rallies may face resistance from broader market optimism and reduced safe-haven demand.