Gold is caught in a tug-of-war between bullish technical signals and a broader risk-on sentiment that is pushing investors toward equities and away from traditional safe havens. Following the announcement of a trade agreement between the United States and the European Union that helped cool tensions over tariffs, investor anxiety eased across global markets. That in turn sapped some of the urgency to hold gold, often considered a hedge against geopolitical uncertainty. The result: gold prices have been subdued, trading in a narrow band with limited upward momentum.
Despite this pressure, the metal has found a degree of stability from a weakening U.S. dollar, which has quietly slipped in recent sessions. A softer dollar tends to support gold prices, as it makes the metal more attractive to foreign buyers. This mild tailwind, however, has not been strong enough to offset the broader shift in sentiment. With stocks climbing and investors emboldened by diminishing trade risks, gold has struggled to attract fresh buying.
The Federal Reserve’s upcoming policy meeting adds another layer of uncertainty. The market widely expects the Fed to hold rates steady, but traders are on edge for any signals about the possibility of rate cuts in the coming months. Should the Fed strike a dovish tone—particularly in the context of President Trump’s recent positive engagement with Fed Chair Jerome Powell—gold could regain some traction. Interest rate cuts typically weaken the dollar and lower the opportunity cost of holding non-yielding assets like gold, both of which are supportive for bullion.
On the technical front, gold may be nearing a pivotal moment. Indicators such as the Relative Strength Index suggest that the metal is approaching oversold territory, typically defined by an RSI reading below 30. This implies that gold has been sold off aggressively and may be due for a rebound. Traders often interpret oversold conditions as a buying opportunity, especially when prices begin to stabilize near known support levels. However, it’s worth noting that oversold does not mean undervalued—prices can remain oversold in strong downtrends if broader sentiment remains negative.
At this point, the bottom line for gold is one of cautious neutrality. Momentum is slightly tilted to the downside in the absence of new catalysts, but technical signs are flashing early warnings that the selling pressure may be reaching exhaustion. Whether gold breaks higher or lower will likely depend on the tone of the Fed’s statement this week and the trajectory of the U.S. dollar. Until then, the yellow metal seems trapped in a holding pattern—neither rallying with conviction nor collapsing under pressure.