Gold Surges as Dollar Dips and Fed Rate Cut Looms

Gold prices are glittering again, rebounding from a daily low of $3,358 to hover around $3,380 during Wednesday’s American trading session. The precious metal, which had been on a four-day winning streak, found fresh support as the US Dollar slid to a new weekly low, dipping below its post-Nonfarm Payrolls range. Despite facing resistance at the critical $3,400 mark, gold’s upward momentum is bolstered by subdued Treasury yields and growing expectations of a Federal Reserve rate cut in September. The market’s cautious mood, coupled with global trade tensions and political shifts at the Fed, is keeping investors on edge, reinforcing gold’s appeal as a safe-haven asset.

The US Dollar’s weakness comes as economic data paints a mixed picture of the world’s largest economy. The latest ISM Services PMI for July disappointed, dropping to 50.1 from 50.8, signaling stagnation in the services sector. Notably, the Employment Index fell to 46.4, underscoring labor market fragility, while the Prices Paid Index surged to 69.9, its highest since October 2022, reigniting inflation concerns. These conflicting signals have fueled uncertainty about the Fed’s next moves, with markets now pricing in an 87% chance of a 25-basis-point rate cut next month, according to the CME FedWatch Tool. Minneapolis Fed President Neel Kashkari added to the dovish sentiment, suggesting that two rate cuts this year seem appropriate given signs of a cooling economy.

Meanwhile, US Treasury yields are ticking up slightly, with the 10-year yield climbing to 4.236% after hitting a three-month low. The 30-year yield also rose to 4.813%, reflecting cautious market consolidation ahead of a $42 billion 10-year note auction. This uptick in yields hasn’t deterred gold’s recovery, as investors weigh the impact of rising geopolitical and trade uncertainties. President Donald Trump’s renewed tariff threats, targeting pharmaceuticals, semiconductors, India, and Russia, are adding fuel to the fire. His pledge to slap tariffs as high as 250% on pharmaceutical imports and to “substantially” raise tariffs on India for buying Russian oil has heightened global tensions, further supporting gold’s safe-haven demand.

The Federal Reserve itself is under scrutiny following the resignation of Governor Adriana Kugler, effective August 8. President Trump is expected to name her replacement soon, sparking speculation about a potential shift toward looser monetary policy. With Trump openly advocating for lower interest rates, any hint of political influence over the Fed could rattle markets and boost gold further. As traders await remarks from Fed officials like Lisa Cook, Susan Collins, and Mary Daly, the interplay of economic data, trade policies, and Fed dynamics will likely keep gold in the spotlight. For now, the yellow metal remains a beacon for investors navigating this turbulent landscape.