Photo by Dmitry Demidko on Unsplash
 

Gold (XAUUSD) retreated after a strong start to the week as shifting rate expectations and a stronger US Dollar weighed on sentiment. Market volatility rose briefly on reports about possible changes at the Federal Reserve, but Trump’s denial eased concerns.  Meanwhile, soft inflation data and hawkish Fed comments added to investor uncertainty. As the Dollar strengthened and equities stabilised, gold lost some of its safe-haven appeal.  However, broader risks and long-term technical signals continue to support the bullish outlook.
 

Gold Retreats as Strong Dollar and Hawkish Fed Outlook Weigh on Sentiment

Gold’s recent bullish momentum lost steam after a strong start to the week.  Reports that President Trump might replace Federal Reserve Chair Jerome Powell briefly fueled safe-haven demand.  However, Trump’s denial on Wednesday calmed investor nerves and helped the US Dollar recover.  As rate expectations shifted, traders reduced their exposure to gold.

Economic indicators added further uncertainty.  June’s flat Producer Price Index (PPI) missed forecasts, strengthening the argument for future rate cuts.  Still, key Federal Reserve officials took a more cautious tone.  Dallas Fed President Lorie Logan and New York Fed President John Williams both signalled that rates may stay elevated to keep inflation in check, particularly given rising tariff risks.

As the US Dollar gained strength, gold prices dipped.  The non-yielding metal typically loses appeal when yields and the dollar rise.  A stable equity market also weakened gold’s safe-haven demand.  Even so, broader risks remain.  Trump’s unpredictable trade policy and the upcoming August 1 tariff rollout could reignite demand for gold.  For now, investors are closely watching upcoming U.S. data and Fed speeches for direction.
 

Inverse Head-and-Shoulders Breakout Signals Long-Term Bullish Momentum

The chart below shows a clear and compelling view of gold’s long-term upward trend. As illustrated in the image, gold formed a classic inverse head-and-shoulders pattern over several years, a structure often seen before major bullish reversals.  This formation developed between 2021 and 2023, with the neckline acting as strong resistance near the $2,070 level.

(Click on image to enlarge)

During this period, gold remained in a broad consolidation range, following its sharp rally in 2020.  This sideways movement reflected market uncertainty, as buyers and sellers battled for control.  Repeated tests of both support and resistance levels created mounting pressure.  The breakout finally came in late 2023, when gold pushed decisively above the neckline, confirming the bullish signal.

Since the breakout, gold has climbed swiftly, now trading above $3,300.  This strong rally reinforces the validity of the pattern and signals a new phase of price discovery.  As long as the price stays above the breakout zone, the technical outlook remains positive.  Momentum is strong, and any pullbacks are likely to attract buying interest from investors seeking to join the long-term trend.
 

Conclusion

Gold's short-term weakness reflects shifting rate expectations and a stronger US Dollar.  However, the long-term technical structure supports a bullish trend.  Despite temporary pullbacks, the breakout above multi-year resistance suggests further upside remains likely.  Investors will continue watching economic data, Fed policy clues, and trade developments for direction.  For now, gold’s long-term trend remains intact, even as short-term volatility persists.

More By This Author:

Gold Hits New Highs Amid Dollar Dip And Fed Policy Uncertainty
Gold Price Rises Despite Strong Dollar As Trump Tariffs Fuel Safe-Haven Demand
Gold’s Bullish Trend Strengthened By Geopolitical Risks And Fed Rate Cut Expectations