HG MARKETS:

Gold (XAU/USD) edged lower toward $3,385 during European trading hours on Tuesday but remained close to a more than one-month high near $3,400, as escalating trade tensions between the United States and the European Union continued to support demand for safe-haven assets.Concerns have intensified following a report by the Wall Street Journal indicating that U.S. President Donald Trump has demanded an increase in the baseline tariff rate to between 15% and 20%, up from the previously stated 10%. This abrupt shift has disrupted the EU’s trade strategy, which was based on a 10% baseline.

In response, Germany, alongside France and other EU nations, has adopted a more aggressive posture. Failure to reach an agreement before the August tariff deadline could further escalate tensions and potentially disrupt global trade flows.Historically, rising geopolitical and economic uncertainty has underpinned demand for gold, a traditional safe-haven asset. However, expectations around U.S. monetary policy could cap the metal’s upside.

Markets are increasingly anticipating that the Federal Reserve will maintain interest rates at current levels during its September policy meeting. According to the CME FedWatch Tool, the likelihood of a rate cut has declined to 58.3%, down from 69.6% a month earlier. The shift comes in the wake of the latest Consumer Price Index (CPI) data, which showed an uptick in prices of imported goods, tempering expectations for dovish Fed action.Given gold’s non-yielding nature, a prolonged restrictive stance by the Fed generally weighs on investor sentiment for the precious metal.

From a technical standpoint, gold is trading within a Symmetrical Triangle pattern on the daily chart, suggesting a phase of volatility contraction. The ascending trendline originates from the May 15 low at $3,120.83, while the descending resistance is drawn from the April 22 high near $3,500.

Key technical levels are also in focus. The 20-day Exponential Moving Average (EMA) around $3,347 serves as immediate support. Meanwhile, the 14-day Relative Strength Index (RSI) has risen toward the 60 mark; a sustained move above this level could signal renewed bullish momentum.

On the upside, a decisive breakout above the psychological resistance at $3,500 would propel gold into uncharted territory, with the next resistance levels seen at $3,550 and $3,600. Conversely, a break below the May 29 low of $3,245 could trigger a decline toward key support at $3,200 and the May 15 through at $3,121.As markets weigh the implications of intensifying US-EU trade conflict and evolving Fed rate expectations, gold remains at the intersection of geopolitical risk and monetary policy uncertainty.