Gold Slips Amid Fed Policy Jitters and Trump’s Tariff Moves, but Uncertainty Keeps Bulls Cautious

Gold prices edged slightly lower, with XAU/USD dipping 0.17% to settle at $3,350.10. Despite a backdrop of rising geopolitical tension and monetary policy speculation, the precious metal faced mixed drivers—resilient U.S. economic data weakened the case for immediate rate cuts, while policy instability and tariff risks preserved gold’s safe-haven appeal.

Trump’s Tariff Threats Stir Inflation Concerns

Markets were rattled early in the previous week by President Trump’s announcement of 30% tariffs on EU and Mexican imports set to begin August 1. Although the news initially lifted gold on safe-haven buying, gains quickly faded as the EU opted to hold off on retaliatory action and signaled a preference for negotiation. Meanwhile, Trump’s softer stance toward Indonesia and signs of progress with Vietnam hinted at a more strategic, bilateral approach to trade.

Tariff-related inflation already appears to be seeping into core consumer prices, with June CPI showing increased costs for household items like audio gear and furniture. This growing pressure is beginning to complicate the Federal Reserve’s path forward, adding another layer of uncertainty.

Fed Autonomy in the Spotlight as Policy Signals Diverge

Markets were briefly shaken by rumors that Trump aimed to oust Federal Reserve Chair Jerome Powell—a move he later denied, though the episode underlined enduring tensions surrounding central bank independence. Fed Governor Christopher Waller voiced support for rate cuts, citing softer labor trends, but the inflation picture remains murky. June’s CPI came in at 2.7% annually, with core CPI steady at 2.9%, while producer prices held flat.

Strong retail sales and a drop in jobless claims underlined the economy’s resilience, reducing pressure on the Fed to act aggressively. As a result, markets scaled back their expectations for rate cuts to 45 basis points by year’s end, down from 50 bps earlier.

This macro strength buoyed the U.S. dollar, pushing the Dollar Index up 0.61% for the week and weighing on gold demand by making it more expensive for overseas buyers.

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