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Gold (XAUUSD) continues to fluctuate as changing global conditions influence market sentiment. The US-China trade truce and potential peace talks with Russia have improved risk appetite, reducing demand for safe-haven assets, such as gold. Meanwhile, the US Dollar regained strength, pressuring gold prices in the short term. Despite this pullback, expectations of Fed rate cuts and a weakening economic backdrop continue to support gold’s long-term outlook. The combination of geopolitical developments and interest rate expectations keeps gold in focus in terms of market sentiment and technical perspective.

Gold Reacts to US-China Truce and Fed Rate Cut Signals

Gold retreated from its earlier gains as the US Dollar regained momentum. The extended US-China trade truce and hopes for peace talks between the US and Russia boosted global risk sentiment. This shift reduced demand for safe-haven assets, such as gold. The shift in sentiment prompted a brief correction, breaking gold’s upward momentum.

Despite the pullback, the broader outlook remains supportive. The Federal Reserve is expected to cut interest rates in September. Rising bets for multiple rate cuts by year-end continue to favor gold. Lower interest rates reduce the opportunity cost of holding gold, making it a more attractive investment. Recent US inflation data and labor market weakness have strengthened the case for monetary easing.

Political pressure on the Fed is also rising. US officials, including President Trump, have pushed for aggressive rate cuts. Despite mixed signals from the Fed, slowing economic trends remain in focus. Treasury yields hold near lower levels, with limited signs of rising inflation. These underlying factors continue to favor gold’s long-term outlook, despite short-term volatility.

Gold Breaks Resistance, Validates Long-Term Bullish Trend

The gold chart below shows three distinct bull phases in its historical performance, each sparked by a breakout above long-term resistance. The initial breakout during the 1970s triggered a powerful rally, driving gold prices to nearly twenty times their previous levels. Following the initial surge, a new breakout in the early 2000s drove a strong rally. The most significant breakout occurred in 2024, surpassing a resistance barrier that had been in place for over four decades.

(Click on image to enlarge)

A red arc beneath the price action suggests a parabolic formation in progress. The setup suggests that gold may be approaching a breakout phase, characterized by faster and more powerful price rallies. Historically, each major bull run followed an extended period of consolidation or sideways movement. Once resistance was broken, the rallies that followed carried strength over time.

Gold’s current price action remains firmly above the breakout zone, reinforcing the validity of the 2024 move. The structure continues to follow a steepening parabolic arc, indicating strong bullish momentum. A consistent formation of higher highs and higher lows confirms the trend's strength. Previous resistance levels have now become support, providing a solid technical foundation for further upside. If the price continues to follow the arc path, it indicates sustained upward momentum. This setup suggests the possibility of another move higher before encountering significant resistance.

Conclusion

Gold stands at the center of a historic bull phase, fueled by expectations of rate cuts, easing geopolitical tensions, and a powerful technical breakout. Short-term pullbacks have not broken its long-term momentum. Expectations of aggressive interest rate cuts by the Fed make gold more appealing by reducing its holding cost. Technical patterns confirm strong upward pressure, with prior resistance now acting as solid support. The overall trend remains positive, with the market setup supporting gold’s long-term strength. 

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