Gold Slips as Geopolitical Tensions Ease
Gold () prices declined by 1.33% on Tuesday as investor demand for safe-haven assets weakened after US President Donald Trump announced a ceasefire between Israel and Iran.
The Washington-brokered truce temporarily reduced risk premiums across global markets, prompting a pullback in gold prices. However, sentiment remains cautious, suggesting that both sides have already violated the ceasefire, highlighting the fragile nature of the agreement. Adding to market unease, a preliminary intelligence assessment indicated that recent US strikes on Iranian nuclear facilities only temporarily hindered Tehran’s progress in developing nuclear weapons. This could renew tensions in the region, eventually reigniting the demand for gold. Nevertheless, markets appear to be pricing in a short-term pause in the conflict, encouraging risk-on positioning and putting downward pressure on gold.
Attention has now shifted to US monetary policy, with Federal Reserve (Fed) Chair Jerome Powell delivering a cautious outlook during his congressional testimony. Powell signalled that interest rates will likely remain unchanged for now, citing uncertainty around the economic impact of new tariffs. Nonetheless, he didn’t dismiss the possibility of a rate cut in July entirely, particularly if inflation softens further or labour market conditions deteriorate. His position appears more neutral than that of other Fed officials, some of whom have openly called for amid increasing signs of economic slowdown.
XAU/USD started to rise during the Asian and early European trading sessions. Today, investors await comments from Fed Chair in his speech at 2:00 p.m. UTC for more clues on the US interest rate path. Key levels to watch are support at $3,295 and resistance at $3,340.
Euro Rises on Dovish Fed Rhetoric
The euro () rose by 0.1% on Tuesday, nearing 1.16250 and reaching an intraday high of 1.16410—the highest level since October 2021. The pair strengthened as the (USD) softened slightly in response to dovish comments from Federal Reserve (Fed) Chair Jerome Powell and weaker-than-expected US economic data.
In testimony before the House Financial Services Committee, Powell noted that elevated tariffs could add upward pressure to as early as this summer. He emphasised that the coming months will be crucial in determining whether the Fed should move towards cutting interest rates. While maintaining a data-dependent stance, Powell left the door open to potential easing if inflation moderates or economic risks grow.
Meanwhile, US unexpectedly declined in June, reinforcing concerns about a cooling labour market and economic momentum. As a result, markets have modestly raised expectations for a near-term policy shift, with the CME FedWatch Tool now showing an 18% chance of a July rate cut. These developments supported the euro as traders reassessed the diverging monetary policy outlooks of the Fed and the European Central Bank.
EUR/USD continued rising during the Asian and early European trading sessions. “The market is complacent about some of the downside risks, ” said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia. “The thing I get is this issue is not over, which means it could come back to be a driver of commodity prices and currency markets again”. Key levels to watch are resistance at 1.16300 and support at 1.14500.
Japanese Yen Declines After BoJ’s Hawkish Rhetoric
The Japanese Yen () declined towards 145.000 on Tuesday, hovering near a one-week low as markets reacted to the Bank of Japan’s (BoJ) latest Summary of Opinions.
Despite ongoing global uncertainties—such as persistent trade tensions and geopolitical risks—the BoJ signalled a cautious but potentially hawkish tilt. One policymaker suggested the possibility of ’decisive’ if inflation and growth align with projections. However, the broader consensus within the central bank emphasised patience, with officials reiterating that any policy tightening would depend on the economy sustainably meeting the BoJ’s targets.
Policymakers highlighted ongoing uncertainty in the global outlook, particularly amid tensions surrounding US trade policy. Several members advocated for maintaining accommodative conditions in the near term, citing fragile external demand and volatile commodity markets. While the hawkish remarks caught market attention, the BoJ’s overall tone remained balanced, reinforcing the view that any shift in rates will be gradual and data-dependent.
On the trade front, Japanese negotiator Ryosei Akazawa is reportedly planning his seventh visit to Washington later this month as Tokyo seeks the removal of US tariffs. Meanwhile, the US-brokered ceasefire between Israel and Iran largely held despite sporadic incidents. However, new intelligence reports suggest that recent US missile strikes caused only limited damage to Iran’s nuclear facilities, indicating that regional risks remain elevated. These developments continue to complicate Japan’s policy outlook, which must balance domestic recovery against external fragility.