Gold prices (XAU/USD) climbed steadily during the European session on Friday, approaching a recent two-week high. The move was largely triggered by US fiscal concerns following the narrow House approval of a massive spending bill. Simultaneously, rising geopolitical tensions—from renewed US-China trade strains to escalating conflict narratives in Ukraine—are pushing investors towards safe-haven assets, weakening the US Dollar in the process.
US Fiscal Concerns Reignite Debt Anxiety
The House of Representatives passed what President Trump has called the "Big, Beautiful Bill"—a sweeping tax and spending proposal expected to add approximately $3.8 trillion to the US national debt over the next decade. While designed to stimulate long-term growth, the bill has sparked fears about unsustainable government debt, future budget deficits, and the erosion of fiscal discipline.
This development has raised red flags among investors and analysts, particularly amid an already fragile macroeconomic backdrop. With markets still digesting the long-term consequences of COVID-era spending, the fresh fiscal stimulus injects new uncertainty into US monetary and credit outlooks.
Global Tensions Amplify Risk-Off Sentiment
Alongside fiscal worries, global political instability has added further momentum to gold’s rise. Renewed tensions between the US and China over trade imbalances have stalled negotiations, while reports emerged that Russian President Putin remains unwilling to scale back military operations in Ukraine.
In a separate incident, the killing of two Israeli diplomats in the United States has reignited global security fears, further enhancing gold’s appeal as a geopolitical hedge.
Markets are increasingly factoring in these threats as persistent rather than isolated. This perception shift encourages a risk-off mood, reinforcing flows into safe-haven assets and away from yield-bearing ones like the US Dollar.
USD Slips Despite Positive Economic Data
Interestingly, the greenback has shown limited response to Thursday’s better-than-expected economic indicators. US jobless claims fell to 227K, and PMI figures for both manufacturing and services surprised to the upside—yet, the USD remained on the back foot.
This disconnect suggests that US fiscal concerns, along with expectations of further Federal Reserve rate cuts, are overshadowing short-term economic strength. As a result, the US Dollar Index (DXY) is struggling to sustain any meaningful recovery.
XAU/USD Technical Outlook – Bulls Remain in Control
From a technical standpoint, gold remains in a bullish structure. The precious metal has found consistent support above the 23.6% Fibonacci retracement of the recent monthly swing and continues to trade above the 200-period SMA on the 4-hour chart.
Key support is seen around $3,258, while resistance is building near $3,325. A decisive break above the $3,346 level could open the door for a rally toward the psychologically significant $3,400 mark.
Oscillators on both the hourly and daily timeframes point to positive momentum, suggesting that any corrective dips may be seen as buying opportunities.
Conclusion: Gold Rallies as US Fiscal Concerns and Geopolitics Dominate
With the intersection of US fiscal concerns and heightened geopolitical risks fueling investor caution, gold remains well-positioned as a defensive play. The lack of USD follow-through despite upbeat data only strengthens the argument for a cautious approach in the short term.
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