(Kitco News) - Gold prices remain range-bound this week as subdued inflation tempers bullish momentum. However, one market analyst warns that a lack of upward drive could soon trigger renewed selling pressure.
Data published this week showed that consumer and producer prices rose less than expected. However, economists note that inflation risks remain elevated, forcing the Federal Reserve to maintain its neutral monetary policy stance through the summer.
In a note published Wednesday, Fawad Razaqzada, Market Analyst at City Index and FOREX.com, said that delayed rate cuts are supporting the U.S. dollar. The U.S. dollar index is currently trading near a three-week high, above 98 points.
“The U.S. dollar has shown signs of strength recently, buoyed by decent economic data and inflation concerns. Trump’s bold fiscal promises and tariff threats are stoking fears of more persistent inflation. While a rate cut in September could still be on the table, sticky inflation may slow the pace of further easing.
This matters because a stronger dollar could act as a headwind for gold,” said Razaqzada.
Despite rising risks, Razaqzada sees only limited downside for gold. He explained that geopolitical uncertainty—stoked by President Donald Trump’s ongoing global trade war—will continue to support gold’s safe-haven appeal.
“If Trump follows through on his threats and trade tensions escalate, it’s not a stretch to imagine gold challenging—and potentially breaking—its record highs again.
But in the near-term outlook, the strength of the U.S. dollar could weigh on prices, pushing them into levels that will attract dip-buyers once again. On the flip side, should meaningful trade agreements materialize, demand for gold could falter sharply. For now, the indecision is keeping gold’s volatility contained,” he said.
“Looking further out, the gold forecast becomes more complicated. If tariffs kick in, inflation may accelerate. That could box the Fed into a corner—limiting its ability to cut rates. In turn, bond yields might climb even higher, weighing on both growth stocks and non-yielding assets like gold. That’s assuming the U.S. doesn’t suffer another credit rating downgrade—yet another wildcard in this story.”
Although gold’s long-term bullish price trend remains intact, Razaqzada said investors should pay close attention to initial support at $3,320 an ounce, followed by $3,300.
“A decisive drop below this area would be a bearish development,” he said. “On the upside, resistance is clustered around $3,350, $3,400, and $3,430. These levels need to be cleared before the bulls can start thinking about new highs again.”
