Tariff Concerns Weigh on Gold Prospects
Fresh tariff proposals from U.S. President Donald Trump targeting Japan, South Korea, and other nations have sparked renewed market caution. Starting August 1, imports from Japan and South Korea could face 25% tariffs. For now, the so-called “reciprocal tariffs” remain capped at 10% until July 9 to allow for negotiations—though concrete agreements have only been reached with the UK and Vietnam.
While this uncertainty has spurred some buying interest, rising U.S. Treasury yields are putting pressure on gold. As bond yields climb, they increase the opportunity cost of holding non-yielding assets like gold, which may limit further price gains. Adding to the tensions, China has warned the U.S. against reigniting the trade dispute by reintroducing tariffs on Chinese goods next month. Beijing has also threatened retaliatory measures against countries that align with U.S. efforts to exclude China from global supply chains.
Markets are now looking ahead to the minutes from the Federal Reserve’s latest meeting, set for release tomorrow. Investors hope the document will offer insights into the current sentiment among Fed policymakers, potentially influencing expectations for future interest rate moves.
Gold Price Holds Steady
On Tuesday morning, gold prices remained stable. As of 7:35 a.m. CET, the most actively traded gold futures contract for August rose by $1.70, reaching $3,344.50 per ounce. The consolidation phase continues, but analysts believe this could be a healthy pause before another potential rally.
Oil Retreats After Hitting Two-Week High
Crude oil prices edged lower after touching a two-week high, as market sentiment was dampened by renewed concerns over U.S. trade policy. Adding to the pressure was Sunday’s announcement by OPEC+ to increase oil production by 548,000 barrels per day starting in August.
However, geopolitical risks are limiting the price drop. In Yemen, Houthi rebels launched a second attack on ships in the Red Sea, escalating fears over disruptions in a critical shipping route.
By 7:45 a.m. CET on Tuesday, WTI futures for the nearest delivery had slipped $0.21 to $67.72 per barrel, while Brent futures fell by $0.19 to $69.39.
Gold Consolidation Seen as a Positive Sign
Gold has been consolidating over the past trading week, a development that experts view positively. While the metal hasn’t resumed its push towards new all-time highs, a potential rally to $4,000 or beyond remains a realistic scenario. The longer the current consolidation lasts, the more powerful any breakout could be.
Is Gold Still a Safe Haven?
Some market commentators have noted a shift in investor focus within the precious metals segment. Silver, copper, and platinum have recently gained more traction, with silver in particular outperforming gold. This trend is reflected in the gold-silver ratio, which has dropped from over 100 in the spring to around 90 today.
Nevertheless, gold continues to demonstrate its role as a safe-haven asset. Despite robust performances in equity markets—especially the S&P 500, Nasdaq-100, and Germany’s DAX—investors have still turned to gold whenever concerns over U.S. debt or trade wars rise to the surface.
U.S. Jobs Report Temporarily Dampens Gold Sentiment
The June U.S. jobs report, released on July 3, delivered stronger-than-expected employment figures outside the agricultural sector. This robust performance raises doubts about imminent rate cuts from the Federal Reserve, which in turn could pressure gold.
Still, gold prices quickly rebounded after the report, suggesting that the underlying strength in the market remains intact. While 10-year U.S. Treasury yields have recently climbed slightly, the increase is not yet significant enough to threaten gold’s upward trajectory.
At the same time, the U.S. dollar continues to weaken. The dollar index remains near its recent lows, providing further support for gold in the face of rising geopolitical and economic uncertainty.
