Gold drops on profit-taking

Gold fell to around $3,380 per ounce on Tuesday, pulling back from a five-week high as investors locked in profits amid mounting geopolitical and economic uncertainty. The retreat came despite continued support from safe-haven demand driven by the upcoming August 1 tariff deadline set by President Donald Trump.

The European Union is racing against time to finalize a trade agreement with the United States to avert the proposed 30% tariffs on a wide range of EU exports, but officials have signaled that the bloc is also preparing retaliatory measures if talks collapse. This tit-for-tat rhetoric has injected volatility into financial markets, keeping risk sentiment fragile and supporting underlying demand for gold.

Despite the dip, gold remains well-supported by a combination of macroeconomic headwinds. The dollar’s recent softness and subdued U.S. Treasury yields have bolstered the appeal of non-yielding assets like gold, especially as investors hedge against potential disruptions to global trade and rising inflationary risks. Additionally, geopolitical tensions, including unrest in the South China Sea and strained U.S.-Iran relations, have added a layer of uncertainty that could continue to underpin demand for bullion.

On the monetary policy front, markets are closely watching central bank developments on both sides of the Atlantic. The European Central Bank is widely expected to hold rates steady at 2.0% during its upcoming meeting later this week, following a series of earlier cuts aimed at supporting the eurozone’s sluggish recovery.

In the U.S., the Federal Reserve’s policy decision is due next week, with investors awaiting fresh guidance on the path for interest rates. While markets are not currently pricing in an immediate rate cut, speculation remains elevated amid political pressure from President Trump, who has repeatedly called for more accommodative monetary policy.

All eyes are now on Fed Chair Jerome Powell, who is scheduled to speak later today. Traders will be parsing his comments for any dovish signals or changes in tone that might influence expectations for monetary easing later in the year. A shift toward a more cautious outlook could reignite momentum in gold markets, particularly if accompanied by renewed trade tensions or weaker economic data.

In the broader context, gold’s price trajectory will likely remain highly sensitive to developments in trade policy, inflation expectations, and central bank actions. While short-term corrections are possible, analysts maintain a bullish medium-term outlook for gold, citing persistent macroeconomic instability, elevated government debt levels, and ongoing central bank gold purchases as key tailwinds.