Can Gold Regain Momentum as Dollar and Yields Strengthen?

Gold prices have fluctuated sharply in response to President Trump’s renewed tariff threats and the extension of the reciprocal tariff deadline to August 1. The uncertainty surrounding trade deals has injected volatility into the market, with investors closely watching for further policy announcements.

This environment has kept gold trading within a narrow range, reflecting the market’s cautious stance. The extension of tariffs and hints of additional levies on BRICS-aligned nations have complicated the outlook for gold.

While safe haven demand remains, the prospect of new tariffs and ongoing trade negotiations continues to influence investor sentiment. The market’s reaction underscores the sensitivity of gold to geopolitical developments.

Despite these headwinds, gold’s role as a hedge against policy risk has not been entirely diminished. Investors are weighing the likelihood of further trade escalations against the stabilizing effects of diplomatic efforts and tariff delays.

Stronger Dollar and Rising Yields Challenge Gold’s Upside

The US dollar index has rebounded from three-year lows, rising to 97.57, while Treasury yields have also climbed, with the 10-year note reaching 4.426%. These developments exert downward pressure on gold, as a stronger dollar makes the metal pricier for international buyers and higher yields increase the opportunity cost of holding non-yielding assets.

Recent labor market data, including a robust nonfarm payroll report, has further bolstered the dollar and yields. The positive economic signals have cast doubt on near-term Federal Reserve rate cuts, reinforcing the dollar’s strength and limiting gold’s appeal as a safe haven.

Gold’s ability to regain momentum will depend on whether these monetary trends persist. If the dollar and yields continue to rise, gold may struggle to break out of its current consolidation phase.

Did you know?
The first documented use of gold for coinage dates back to around 600 BCE in the kingdom of Lydia (modern-day Turkey). These early coins were made of electrum, a naturally occurring alloy of gold and silver.

Safe Haven Demand Faces Tests Amid Easing Geopolitical Risks

Calming tensions in the Middle East and tentative trade agreements have reduced the urgency for safe haven assets like gold. The recent ceasefire between Iran and Israel, along with progress on rare earth shipments between the US and China, has dampened risk premiums that previously supported gold prices.

However, the threat of renewed trade hostilities and the potential for additional tariffs keep a floor under gold’s value. Gold's safe haven status continues to be a dynamic factor in its price trajectory as geopolitical risks fluctuate.

ALSO READ | Gold Prices Remain Flat Amid Competing Market Forces and Investor Caution

Market Technicals Signal Consolidation, Awaiting Breakout

Gold has traded in a symmetrical triangle pattern, consolidating between strong support at $3,300 and resistance at $3,400. Analysts note that a breakout or breakdown from this range could trigger a 2-3% move in either direction.

The current consolidation reflects market indecision, with participants awaiting clearer signals from upcoming US Federal Reserve meeting minutes and further trade policy developments. Until a decisive move occurs, gold is likely to remain range-bound, mirroring broader market caution.

Trade Policy and Economic Data Remain Key Catalysts

Looking ahead, gold’s trajectory will be shaped by the interplay of trade policy announcements and macroeconomic data. The upcoming expiry of the US trade tariff extension and the release of Federal Reserve meeting minutes are expected to provide fresh direction for the market.

Strong US economic data has so far limited gold’s recovery, but any signs of policy shifts or renewed trade tensions could quickly alter the landscape. Investors are advised to monitor both global trade negotiations and central bank signals for cues on gold’s next move.