Gold’s upward momentum appears to be slowing. The cautious optimism surrounding potential trade deals is a key factor, but not the only one. Yesterday, two important developments entered the market. 

The first was the FOMC meeting, where Chair Powell stated that if tariffs remain at current levels, the Fed may have to hold rates steady for the next year. His opening statement, which included the line, “Without price stability, policymakers can’t achieve strong and sustained employment,” made it clear that inflation remains the Fed’s top priority. This means that the three or four rate cuts previously expected for this year are unlikely unless the U.S. enters a deep recession. The Fed’s commitment to keeping long-term inflation expectations anchored is a negative factor for gold, as higher rates and lower inflation expectations tend to limit gold’s upside. 

The second development, which may have flown under the radar, came from 32 House Republicans. They stated that the reconciliation bill, which includes the extension of tax cuts, must be more fiscally responsible or it will not pass. This poses a serious risk to Trump’s tax cut plan. Any outcome that leads to either reduced spending or no tax cuts would likely narrow the budget deficit, which is also a bearish factor for gold. 

In the short to medium term, two scenarios could still trigger a spike in gold. The first would be a full-scale escalation of the Pakistan–India conflict. The second would be the breakdown of the current signs of China–U.S. trade war de-escalation. Without these developments, gold could face additional profit-taking pressure, a trend that managed money has already started weeks ago. 

For a more detailed view, please refer to our monthly market outlook on gold’s long-term fundamental trends. 

(XAUUSD Daily Chart) 

The daily chart is signaling that a potential top may be forming. Gold has a tendency to form weak double tops at key highs across nearly all timeframes. These patterns often lead to two-wave downward corrections. Similar setups occurred on the monthly chart in the 1880s and again in 2011, but they can also be observed on the 1-day, 1-hour, or even 15-minute charts. 

This pattern typically features a second top that is weaker and lower than the first, with the first often showing a brief spike above a major resistance level. That same structure appears to be developing now, which could signal that a downward correction is beginning—something that fundamental trends have been hinting at for some time. 

If a correction starts, the 3,170–3,200 zone will be a major support area and a likely target for the first wave down. However, if gold recaptures the 3,500 level, this bearish setup would be invalidated. 

(XAUUSD 1-H Chart) 

In the shorter term, gold has broken below the 3,350–3,370 support zone and is now retesting it. If this zone holds as resistance, a move toward the red trendline, currently at 3,275, could begin. 

In the case of a recapture, the white trendline at 3,425 will likely become the new main resistance level to watch for the gold price.