Gold prices remained calm below $3,300, with investors choosing not to make any major moves ahead of several key economic catalysts.
The combination of escalating trade tensions and the anticipation of the Federal Reserve (Fed) meeting minutes for June has kept the gold market flat.
After a sharp drop on Tuesday, gold prices are still struggling to recover. This comes as investors reassess developments from Washington and Beijing.
Mixed inflation data from China and a stronger US dollar, on renewed hopes for trade talks, have also dampened interest in the precious metal for now.
Trade Tensions Escalate, Market Sentiment More Depressed
President Donald Trump’s tariff agenda continues to be a major factor influencing the market. Although the retaliatory talks have been extended until August 1, the real threat has not abated.
Trump has threatened to impose tariffs of 25% to 40% on imports from 12 countries, including a special 10% tariff on BRICS countries such as India, in addition to plans to impose a 50% tariff on copper imports over the next 30 months.
While this short-term delay is seen as time for negotiations, markets are now increasingly anticipating a more aggressive approach to US trade policy. The possibility of a sudden unilateral imposition of tariffs continues to inject uncertainty into the global economic outlook, with no clear path to resolution.
What does this mean for gold?
Increased trade risks are supporting demand for gold. However, market sentiment that remains optimistic about a trade settlement is currently giving the US dollar an advantage.
Investors are also concerned that the tariff pressure could cause central banks to delay easing, which could undermine gold’s appeal as a hedge against monetary policy.
China Inflation Data Doesn't Change Market Mood
The latest inflation report from China gave mixed signals:
The Consumer Price Index (CPI) rose 1.0% in June, up from a 0.1% decline in May.
However, the Producer Price Index (PPI) fell 3.6%, worse than expected, indicating continued weakness in the industrial sector.
The rise in CPI suggests a slight recovery in domestic consumption, but prolonged deflation in the manufacturing sector reflects structural challenges in the manufacturing and export industries. China's weak inflation reflects broader global disinflationary pressures.
For now, the data is not providing significant support to gold prices as investors remain focused on Fed policy.
Focus Now on Fed Minutes
With the Fed still sticking to a data-driven approach, the June FOMC minutes due out today are seen as a key indicator of policy direction.
After a stronger US jobs report last week, investors are now looking for clues as to whether the Fed will remain on hold through the summer or start preparing to ease policy due to trade uncertainty.
The current market price shows that the probability of a September rate cut has dropped to 61%, down from 73% last week. This weakening of expectations has also put pressure on gold prices, with investors more cautious about re-entering the market without clearer guidance.
What Will Happen?
If the Fed minutes show that they are still cautious about cutting rates due to tariff-related inflation, gold is likely to remain weak.
However, if there are signs that the Fed is starting to worry about slowing global growth or geopolitical tensions, demand for gold as a policy hedge could pick up again.
Conclusion
The slow movement in gold prices is currently reflecting the overall uncertainty in global markets. With important decisions on trade and monetary policy still hanging in the balance, investors remain light-hearted and sensitive to any news that comes out.
The gloomy tone in the gold market at the moment clearly reflects investors’ doubts. They are now faced with a complex macro backdrop between geopolitical tensions, a re-strengthening US dollar, and the Fed’s currently ‘wait and see’ stance.
We advise investors to continue to closely monitor a combination of factors, particularly US trade policy and Fed communications. While gold remains a strategic hedge in an uncertain environment, investor sentiment is expected to remain subdued as long as there is no clearer narrative from Washington or the Fed.
