Gold outlook: XAU/USD eases as dollar rebounds but tariff deadline looms

• Gold outlook remains largely supported despite rising US dollar and yields
• Trump’s tariff deadline on July 9 drives urgency among US trading partners
• PBOC gold buying continued in June

 

Gold prices kicked off the week on the back foot, falling around 0.9% by mid-morning London trade, as the US dollar advanced across the board and Treasury futures fell for the fourth session. This comes after the yellow metal managed to post a relatively small 1.9% gain last week, snapping a two-week losing streak. But the broader picture hasn’t changed dramatically — gold remains in consolidation mode, digesting its historic run-up in the first half of 2025. Much of this week’s focus will be on potential trade deal and tariffs, with the July 9 deadline now jus two days away. But judging by gold’s recent price action, and the fact that US equity indices are at record highs, investors clearly don’t expect to see the sort of fall out that happened earlier in the year, and instead envisage either trade deals, or agreements to extend talks, with major partners. Against this backdrop, there is a risk we could see the gold prices pull back a little from what still is historically overbought prices on long-term charts. But make no mistake, the long-term gold outlook remains positive.

 

Could July 9 tariff deadline be a volatility trigger?

 

With a relatively light macroeconomic calendar this week, all eyes are on the July 9 reciprocal tariff deadline. US trading partners are reportedly rushing to finalize deals with the Trump administration ahead of this date. European stocks were firmer and S&P 500 futures rebounded after Friday’s drop.

 

While trade uncertainty has waned in recent months, the upcoming deadline is a key risk event that could reignite safe-haven demand. Conversely, a flurry of finalized deals, or at least agreements to extend talks, might remove one of gold’s recent supports, especially with equities at record highs and tensions in the Middle East cooling off.

 

Indeed, it is worth pointing out that gold has priced in a lot of risk that perhaps hasn’t materialised over the past couple of years. The metal has now logged gains in six of the past seven quarters, returning more than 75% over that period. But since hitting its record high of $3,500 in April, the metal has mostly drifted sideways, hinting at exhaustion near those elevated levels. Without a major macro or geopolitical spark, a sustained breakout above $3,500 may prove elusive in the near term.

 

Chinese central bank buying continues, boosting gold outlook

 

One of the most important short-term drivers of gold has been China’s central bank gold purchases. For the past eight months, the People’s Bank of China (PBOC) has consistently added to its gold reserves, contributing significantly to gold’s upside. This part of the wider concerns about a ballooning US fiscal deficit, with central banks and other institutions eager to hedge their bets in case the US defaults. The weakening of the dollar has also prompted these institution to rethink their reliance on US assets.

 

In June, bullion held by the PBOC rose by 70,000 troy ounces. This means that the central bank’s gold reserves have now climbed by 1.1 million troy ounces since the purchases began in November.

 

While the news hasn’t supported prices today, it is a reminder that the PBOC and other central banks remain important players in physical demand for gold, which is keeping the long-term outlook positive for prices. Even if the PBOC had paused its purchases, this wouldn’t have been surprising given the high price levels and previous buying spree. But the fact that they didn’t pause, this means gold is slightly less vulnerable to a bout of speculative selling. A temporary break from Chinese accumulation might still be the case in July or in the coming months, but this alone will probably not derail the broader bullish trend, although it could catalyse a mini correction as markets reassess short-term demand.

 

Gold outlook: Technical analysis and levels to watch

 

The technical gold outlook still favours consolidation rather than a trend resumption, but a lot can change this week. On the daily chart, though, gold is starting to break its rising trend line from early 2025, which points to some bearish momentum if key support at $3,300 breaks decisively this week. Otherwise, we could once again see a bit of a recovery and continued consolidation.

 

 

Key levels to watch

• Support levels to watch: $3,300, $3,250, and deeper at $3,167
• Resistance levels overhead: $3,325, $3,340, and $3,400

 

A break below the $3,300 region on the gold chart could accelerate a short-term pullback, especially if macro headwinds — such as a rebounding US dollar and higher bond yields — persist. But if volatility spikes around the tariff deadline or otherwise, the uptrend could reassert itself quickly.

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R