Gold Prices Rise Amid Trade War and Dollar Decline
Gold prices increased in the European market on Tuesday, holding above the $3,300 per ounce barrier, supported by the decline in U.S. dollar levels in the foreign exchange market. This rise comes as President Donald Trump announced the imposition of elevated tariffs starting August 1, marking a new phase in the trade war he initiated earlier this year.
The Impact of Tariffs on Trade
The announcement of tariffs has caused concern among trade partners, with Trump informing them that sharply higher U.S. tariffs will begin on August 1. However, he stated that he is open to an extension if countries present proposals. This development has contributed to the decline of the U.S. dollar and the increase in gold prices.
Current Gold Prices
Gold prices today rose by 0.35% to $3,345.84, from the opening level of $3,336.72, with a session low at $3,330.70. At Monday’s settlement, gold prices were little changed after briefly touching a one-week low at $3,297 per ounce earlier in the session.
U.S. Dollar Performance
The dollar index fell on Tuesday by 0.35%, retreating from a two-week high at 97.67 points, reflecting renewed weakness in the U.S. currency against a basket of major and minor currencies. The decline in dollar levels is also attributed to renewed recession fears in the United States, following Trump’s announcement of 25% tariffs on goods imported from Japan and South Korea.
U.S. Interest Rates and Their Impact
According to the CME Group’s FedWatch tool, the probability of a 25-basis-point rate cut in the July meeting is currently priced at 5%, while the probability of rates remaining unchanged stands at 95%. The probability of a 25-basis-point rate cut in the September meeting is currently priced at 62%, with a 38% probability of no change in interest rates. Investors are eagerly awaiting the minutes of the Federal Reserve’s latest policy meeting, due for release on Wednesday, to reassess these probabilities.
Gold Outlook and Market Analysis
Tim Waterer, Chief Market Analyst at KCM Trade, stated, “Trump’s latest tariff rhetoric keeps gold in focus as a hedge against uncertainty, but the strength of the U.S. dollar and rising bond yields are limiting its immediate upside.” Waterer added, “Traders appear relatively unfazed by Trump’s tariff talk, and with safe-haven demand largely contained at this stage, gold is still waiting for the right moment in anticipation of a potential breakout.”
SPDR Fund and Gold Holdings
Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained unchanged for the third consecutive day, with total holdings at 947.66 metric tons, the lowest level since June 18.
Conclusion
In conclusion, the current trade war and decline in U.S. dollar levels have contributed to the increase in gold prices. As investors continue to monitor the situation, gold remains a focal point as a hedge against uncertainty. However, the strength of the U.S. dollar and rising bond yields are limiting its immediate upside. The upcoming release of the Federal Reserve’s policy meeting minutes will provide further insight into the future of U.S. interest rates and their impact on gold prices.
