Gold steadies as policymakers rush to pass Trump's tax bill
- Gold price stabilizes on Monday, with the US Dollar steadying to start the week.
- The Trump administration moves ahead with the Big Beautiful tax Bill.
- XAU/USD remains below $3,300 with Thursday’s employment data and the US budget deficit in focus.
Gold (XAU/USD) is entering the week below $3,300 at the time of writing on Monday as markets brace for heightened volatility ahead of Friday’s US Independence Day holiday.
Political developments in the United States have taken center stage, with the US President Donald Trump’s administration accelerating efforts to pass the "One Big Beautiful Bill" by his self-imposed July 4 deadline.
The legislation, which narrowly passed the Senate over the weekend, proposes a sweeping overhaul of the tax code, including broad deductions funded by cuts to Medicaid and green energy programs.
As debate intensifies, concerns over rising fiscal deficits and long-term inflation are beginning to weigh on the US Dollar, providing a supportive backdrop for Gold.
The Nonfarm Payrolls (NFP) report for June is scheduled for Thursday this time, earlier than usual due to the Fourth of July Independence Day holiday in the US on Friday.
Traders are positioning cautiously, anticipating potential shifts in currency and yield dynamics that could drive further demand for the precious metal.
Daily digest market move: Gold remains cautious ahead of President Trump’s Big Beautiful Bill
- The proposed “One Big Beautiful Bill” raises fears of a ballooning US deficit. Investors are concerned that aggressive tax cuts, paired with reductions in government spending, could erode fiscal discipline and fuel long-term inflation, supporting demand for Gold as a hedge.
- The bill narrowly cleared the Senate over the weekend. This has heightened market sensitivity to US political developments, potentially pressuring the US Dollar (USD) and lifting XAU/USD.
- Expectations that deficit-driven tax policies may re-ignite inflation fears and further bolster Gold’s role as a store of value. The metal could continue to benefit if real US yields ease, as investors reassess policy outlooks.
- A weaker US Dollar, resulting from fiscal or monetary policy, could make Gold more attractive to foreign buyers.
- Federal Reserve Chair Powell is expected to speak on Tuesday. Markets will closely analyse his tone for policy clues on when the Fed will cut interest rates. Any dovish remarks may weaken the Dollar and increase demand for Gold.
- The ADP Employment Change on Wednesday measures the strength of the private sector labour market. Wednesday’s print is expected to show 85,000 jobs added to the US private sector in June, up from just 37,000 in May. As a closely watched precursor to the NFP report, a soft print may boost safe-haven demand for Gold.
- The Nonfarm Payrolls data release due on Thursday is expected to decrease to 110,000 in June from 139,000 in May. The unemployment rate is expected to rise to 4.3% from 4.2%. A rise in unemployment may increase expectations of interest rate decreases by the Fed, which is supportive of non-yielding assets, such as Gold.
- The US Personal Consumption Expenditures (PCE) price index, which is closely watched by the Fed, was published on Friday. Since the central bank targets a 2% inflation rate, the higher-than-expected print reinforces the view that inflation remains elevated. This could complicate the outlook for monetary policy, potentially delaying rate cuts and capping short-term gains for Gold.
Gold technical analysis: Descending triangle points to downside risk below $3,300
Gold is trading at $3,280 at the time of writing on Monday, confined between the 50% and the 38.2% Fibonacci retracement levels of the April low-high move at $3,228 and $3,292, respectively.
This follows a recent break below both the 20-day and 50-day Simple Moving Averages (SMAs), which are providing additional resistance above the $3,300 psychological level at $3,350 and $3,320, respectively.
The metal’s recovery attempts remain capped by resistance around the 38.2% Fibonacci retracement level at $3,292, while downside risks persist as momentum weakens.
Gold (XAU/USD) daily chart
The Relative Strength Index (RSI) indicator on the daily chart is currently pointing downward, near 44, indicating increasing bearish momentum without yet entering oversold territory. A daily close below $3,228 could open the door toward the 100-day SMA at $3,168, while a sustained push back above $3,292 would be needed to shift short-term sentiment back to the upside.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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