Gold remains on the back foot, still above $3,400

Gold now losses some momentum and trades with modest losses, although it manages to keep the trade above the $3,400 mark per troy ounce on Wednesday. The precious metal faces some fresh selling pressure soon after hitting multi-week tops near $3,440 earlier in the session, always amid a decent rebound in the Greenback and US yields across the curve.

XAU/USD Technical Overview

From a technical perspective, this week's breakout through the $3,368-3,370 horizontal barrier and a subsequent move beyond the $3,400 mark on Tuesday was seen as a key trigger for bullish traders. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and are still away from being in the oversold zone. Hence, any further decline might still be seen as a buying opportunity near the $3,400 round figure. Some follow-through selling, however, might negate the positive outlook and drag the Gold price back towards the $3,370 resistance-turned-support.

On the flip side, the Asian session peak, around the $3,438-3,439 region, now seems to act as an immediate hurdle ahead of the July swing high, around the $3,451-3,452 zone. A sustained strength beyond the latter should pave the way for a move towards retesting the all-time peak, around the $3,500 psychological mark touched in April.

Fundamental Overview

The optimism over a US-Japan trade deal remains supportive of the upbeat market mood, which is seen as a key factor undermining the safe-haven precious metal. The downside, however, remains cushioned in the wake of a softer US Dollar (USD).

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near a two-week low amid the uncertainty over the likely timing and pace of interest rate cuts by the Federal Reserve (Fed). Adding to this, worries about the Fed's independence keep the USD bulls on the defensive and act as a tailwind for the non-yielding yellow metal. Hence, it will be prudent to wait for strong follow-through selling before confirming that the XAU/USD pair has topped out.

Gold price bulls not ready to give up yet despite trade optimism

US President Donald Trump announced in a social media post that his administration had completed a massive trade deal with Japan. Trump added that Japan will pay reciprocal tariffs of 15% and will open its country to trade, including cars and trucks, rice, and certain other agricultural products. 

The positive developments trigger a fresh wave of the global risk-on trade and dent demand for traditional safe-haven assets. Apart from this, a modest US Dollar bounce from a two-week low touched on Tuesday drives some flows away from the Gold price during the Asian session on Wednesday.

Meanwhile, Trump continues to push for lower interest rates and has publicly called for Federal Reserve Chair Jerome Powell’s resignation. Moreover, US Treasury Secretary Scott Bessent renewed calls for a sweeping internal review of the Fed’s operations, fueling worries about the central bank's independence. 

This, in turn, is holding back the USD bulls from placing aggressive bets. Furthermore, the uncertainty over the eventual state of tariffs globally has been a huge overhang for traders, which could further act as a tailwind for the non-yielding yellow metal and help limit any meaningful corrective decline. 

Traders now look forward to the release of the US Existing Home Sales data for some impetus later during the North American session. The focus, however, will remain glued to the release of the global flash PMIs, which will influence the global risk sentiment and provide a fresh impetus to the XAU/USD pair.