Gold Dips Below $3,300 as Trump’s Budget Vote Bolsters Dollar

Gold prices slid below $3,300 on May 22, 2025, trading at $3,289, down 0.83% from a two-week high of $3,345, as the US dollar rebounded after the House passed President Donald Trump’s $4 trillion deficit-heavy budget. Strong US PMI data and easing unemployment claims further dented gold’s safe-haven appeal, despite lingering US debt concerns. Experts warn that the Federal Reserve, under Chair Jerome Powell, and global markets must brace for volatility as geopolitical risks and fiscal strains collide. Strategic policy moves are essential to prevent a broader economic shakeup.

Dollar Rebounds on Budget Vote and Solid Data

The US Dollar Index (DXY) rose 0.18% to 99.86, recovering from a three-day slide, as the House approved Trump’s budget, now headed to the Senate. The bill, projected to add $4 trillion to the $36 trillion US debt, follows Moody’s downgrade to Aa1, yet upbeat data lifted sentiment. May’s S&P Global Manufacturing PMI jumped to 52.3 from 50.2, and Services PMI hit 52.3, both beating forecasts. Initial Jobless Claims fell to 227,000, below the expected 230,000. The 2011 debt crisis, which briefly propped up the dollar, shows fiscal fears can paradoxically strengthen it. Experts argue Powell must signal rate stability to curb inflation, projected to exceed 2% through 2027.

Geopolitical Risks Keep Gold Buoyant

Despite the dip, gold’s long-term outlook remains bullish, supported by Middle East tensions. Reports suggest Israel may target Iran’s nuclear facilities if US-Iran talks falter, echoing 2019’s Gulf crisis that lifted gold 5% in a month. Safe-haven demand persists amid Trump’s trade policies and debt concerns, though fading risk appetite capped gains. US 10-year Treasury yields eased to 4.55%, with real yields at 2.207%, softening pressure on gold. Experts caution that markets should monitor Friday’s US housing data and Fed speeches for clues on gold’s next move, as geopolitical flares could push prices toward $3,400.

Technicals Signal Pause in Gold’s Rally

Gold retreated below $3,300 as traders locked in profits, but the Relative Strength Index above 50 confirms a bullish trend. Resistance looms at $3,345, with $3,400 and May 7’s high of $3,438 in sight if breached. A bearish turn requires a close below $3,300, targeting $3,204 and the 50-day SMA at $3,191. The 2023 gold rally, driven by similar debt fears, stalled at overbought levels, warning of volatility. Experts argue investors must hedge with diversified assets, as tariff-driven inflation risks could sway gold’s path.

According to experts, Powell must maintain data-driven clarity to steady markets, while global central banks should align to counter fiscal and geopolitical turbulence. Trump’s budget risks repeating 2022’s inflation spike, which hurt equities. Gold’s dip offers a buying chance, but overbuying could falter if US data stays strong. Experts urge disciplined policy, citing past recoveries like 2020’s, to ensure gold and markets navigate this stormy landscape without crashing.