At the outset of this week, the precious metal market witnessed a significant resurgence, particularly highlighted by gold’s emphatic breach of the robust resistance level pegged at approximately $3,400 per ounce. This noteworthy ascent from a period of prolonged stability was not merely a consequence of market dynamics or speculative endeavours. It was deeply rooted in a multifaceted macroeconomic landscape characterized by diminishing confidence in the dynamic between the White House and the Federal Reserve, coupled with the looming threat of tariffs given the fast-approaching deadline of August 1.
Monday’s trading session saw gold, represented by the XAU/USD pair, witness a surge of over 1%, capitalising on a pronounced decrease in the U.S. dollar’s value, which notably dipped below the 98.00 threshold on various indices. Concurrently, U.S. Treasury yields also experienced a downturn, falling beneath the 2% benchmark. This retreat in yields, alongside a declining dollar, can be attributed to the market’s reaction to escalating concerns over political incursions into central bank policies and a deteriorating outlook on trade.
From the corridors of Washington, reports emerged indicating a palpable tension within the current administration concerning the tenure of Federal Reserve Chairman Jerome Powell. Notably, The Wall Street Journal reported that Treasury Secretary Bessent urged President Trump to refrain from dismissing Powell, highlighting the potential repercussions on the credibility of the Federal Reserve.
Despite President Trump’s denial of such intentions in a Truth Social post, describing the speculation as “dishonest,” an air of uncertainty persists. This atmosphere of doubt is further compounded by actions such as those of Representative Anna Paulina Luna, who has openly accused Powell of perjury in relation to his Congressional testimonies.
On the trade front, Europe has shown a readiness to retaliate, with Bloomberg reporting that EU diplomats are in the process of finalizing a package aimed at imposing retaliatory tariffs on $72 billion worth of U.S. exports should negotiations falter before the August 1 deadline. The scope of these proposed tariffs encompasses significant sectors of the U.S. economy, including automobiles, aircraft, bourbon, and digital services, underlining the escalating trade tensions that are poised to remain a focal point of market sentiment.
Amidst these developments, economic data emerging from the U.S. presents a mixed picture. Although there was a slight improvement in consumer confidence, inflation figures for June showed a continuing elevated trend, inching closer to the 3% mark. With a relatively light economic calendar in the U.S. for the week, encompassing job figures, GDP updates, and durable goods orders, the primary focus of the market continues to be on monetary policy and the Federal Reserve’s autonomy amidst increasing political pressure.
From a technical standpoint, gold has decisively broken free from its five-week stagnation, surpassing the $3,350 resistance and reaching a peak of $3,401—a zenith not seen in the last five weeks. Momentum indicators, such as the 14-day Relative Strength Index (RSI) advancing towards 60, bolster the argument for a continued bullish trajectory. Should the XAU/USD pair sustain its position above $3,400, it is poised for further testing at the June high of $3,452, with the potential to challenge the all-time high near $3,500.
Conversely, a reversal of these gains could see gold prices retract towards the previously established support levels at $3,350 and $3,300. Below these markers, the June 30 low at $3,246 and the 100-day Simple Moving Average (SMA) around $3,218 stand as critical points of support.
In the grand scheme of things, gold consistently serves as a gauge of global unrest, mirroring escalating trade disputes, internal policy dissonance within the U.S., and waning confidence in the autonomy of central banks. Amidst this backdrop of fluctuating variables, gold not only remains a coveted hedge but also emerges as a reflection of the deepening disquiet within financial markets.
