Gold prices rose over 1% in early trading, reclaiming $3,300 per ounce after steep losses fueled by Federal Reserve hawkishness.
The recovery shifts focus to today’s critical deadline suspending U.S. tariffs on major trading partners, including Canada and Mexico. Former President Donald Trump’s threat to impose new tariffs absent a deal has intensified market uncertainty.
Federal Reserve Chair Jerome Powell dampened rate-cut expectations yesterday, stating it was “too early” to discuss September reductions amid tariff-driven inflation concerns.
This stance lowered 2024 rate-cut odds to 40%, pressuring gold. However, analysts note tariffs could exacerbate underlying U.S. economic fragility highlighted by a 15% annual drop in private domestic investment potentially supporting gold’s rebound despite Fed policy.
The Wall Street Journal Editorial Board linked trade and immigration uncertainty to stalled investment, urging clarity for economic stability. Yet gold’s muted reaction to these risks reflects market confidence in U.S. resilience, buoyed by strong corporate earnings. Simultaneously, physical demand weakens: World Gold Council data shows Q2 central bank purchases fell 21% year-on-year, while jewelry demand dropped 14%.
Elevated Treasury yields, anchored by monetary tightening, further challenge gold. Bond market volatility (measured by the MOVE index) sits near 2024 lows, reducing safe-haven urgency. Traders now await the tariff deadline outcome, which could pivot gold between inflation fears and growth concerns.
