Gold retreats sharply from over two-week high, trades below $3,400

Gold corrects lower after testing $3,400 earlier in the day but manages to hold comfortably above $3,900. While markets remain cautious following US President Donald Trump's tariff threats, growing hopes of a Russia-Ukraine peace deal limit XAU/USD's upside. 

XAU/USD Technical Overview

From a technical perspective, the commodity has been struggling to capitalize on the recent strength beyond the $3,380-3,385 region. Moreover, mixed oscillators on the daily chart warrant caution for the XAU/USD bulls. That said, this week's bounce from the 200-period Simple Moving Average (SMA) on the 4-hour chart backs the case for a further appreciating move. Some follow-through buying beyond the $3,400 mark will reaffirm the constructive outlook and lift the Gold price to the $3,420-3,422 intermediate hurdle en route to the $3,434-3,435 supply zone. A strength move beyond the latter would set the stage for a move towards retesting the all-time peak, around the $3,500 psychological mark touched in April.

On the flip side, any corrective pullback might continue to find decent support near the $3,350 area. This is closely followed by the 200-period SMA on the 4-hour chart, which, if broken decisively, might prompt some technical selling and drag the Gold price to the $3,315 intermediate support en route to the $3,300 round figure. Acceptance below the latter would expose the $3,268 region, or a one-month low touched last week.

Fundamental Overview

US President Donald Trump's fresh tariff threats act as a tailwind for the Gold price. Apart from this, the prevalent US Dollar (USD) selling bias, fueled by the growing acceptance that the Federal Reserve (Fed) will resume its rate-cutting cycle in September, should contribute to limiting losses for the non-yielding yellow metal. Hence, it will be prudent to wait for some follow-through selling before confirming that the XAU/USD pair's recent move up witnessed over the past week or so has run out of steam.

Gold price attracts intraday selling on Trump-Putin summit news

US President Donald Trump on Wednesday signed an executive order imposing an additional 25% tariff on Indian imports as "punishment" for buying oil from Russia, taking the total tariffs to 50%. Furthermore, reports suggest that Trump could impose an extra 15% tariff on all Japanese imports.

Moreover, Trump had announced earlier this week that US tariffs on semiconductor and pharmaceutical imports would be unveiled within the next week or so. This revives concerns about the potential economic fallout from a global trade war and boosts the safe-haven Gold price on Thursday.

Traders have been pricing in the possibility of more interest rate cuts than previously expected by the Federal Reserve this year. The bets were lifted by the weaker-than-expected US Nonfarm Payrolls report released last Friday and Tuesday's disappointing US ISM Services PMI print.

According to the CME Group's FedWatch Tool, market participants see over a 90% chance that the US central bank will lower borrowing costs at the next monetary policy meeting in September. Moreover, the Fed is expected to deliver at least two 25-basis-point rate cuts by the end of this year.

Dovish Fed expectations fail to assist the US Dollar in registering any meaningful recovery from a one-week low touched on Wednesday and further benefit the non-yielding yellow metal. However, a positive risk tone, tracking overnight gains on Wall Street, caps gains for the precious metal.

Traders now look forward to the US Weekly Initial Jobless Claims, due for release later during the North American session. This, along with speeches from influential FOMC members, would drive the USD demand and produce short-term trading opportunities around the XAU/USD pair.