Markets responded with a classic “flight to safety” dynamic after the announcement, underscored by a modest strengthening of the U. S. dollar and squeezed yields that traditionally dampen gold’s appeal. Yet, uncertainty surrounding global trade policy continues to underpin bullion’s allure.
OANDA senior market strategist Kelvin Wong described the environment as “uncertainty on the implementation of U. S. global trade tariffs policy,” explaining that an intraday surge above US $3,360 could hasten a rally towards US $3,435. This aligns with the view that gold favours periods marked by geopolitical stress, inflation concerns and dovish central bank signals.
The tariff threat stems from letters sent to EU Commission President Ursula von der Leyen and Mexican President Claudia Sheinbaum, which warned of steep tariffs effective from 1 August. Despite the seriousness of the claim, both the EU and Mexico responded by labelling the tariffs “unfair and disruptive.” The EU said it would temporarily delay retaliatory measures into early August while urging diplomatic resolution.
The euro weakened to its lowest level in three weeks amid broader currency market jitters, while the dollar posted mild gains. Meanwhile, bitcoin surged past US $120,000, reflecting investors’ broader search for alternative stores of value.
Attention is now firmly on U. S. inflation data due Tuesday. June’s figures could influence expectations around the Federal Reserve’s policy trajectory and timing of interest‑rate reductions. Most markets currently anticipate around a half‑point of rate easing by year‑end.
Gold’s upward momentum contrasts with conditions a week earlier, when signs of calming trade rhetoric sparked a modest price correction. Spot gold dipped to US $3,311 on 7 July after an extension of tariff reprieves by President Trump was interpreted as a sign of thawing tensions. However, the reprieve is temporary, and fresh threats have grounded that short‑term respite.
Metals markets continue to react sensitively to the interplay between trade policy and macroeconomic indicators. Rising Treasury yields and a firm dollar tend to suppress gold’s performance, while geopolitical turbulence and potential inflation often drive demand higher. This dynamic was in evidence on Monday, as mixed signals from stocks, bonds, and currencies created a volatile but supportive backdrop for precious metals.
Analysts caution that gold remains vulnerable to shifts in market sentiment. If data indicates a resilient U. S. economy and pushes back forecasts for rate cuts, gold could struggle. Conversely, any further escalation in tariff policy or inflation surprises could rekindle a sustained rally.
Additional precious metals tracked alongside gold on Monday. Silver rose by 1.2 per cent to US $38.82, platinum dropped 1.3 per cent to US $1,380.67, and palladium gained 0.2 per cent to US $1,216.77. Their movements mirrored broader market positioning, as investors assessed relative risk and volatility across commodities.
Longer term, gold has demonstrated strong resilience. It has surged nearly 26 per cent in 2025, supported by central‐bank purchasing, global debt concerns, and persistent macroeconomic uncertainty. Central banks, especially in China, Russia and Turkey, are continuing to accumulate significant reserves, echoing a broader trend of de‑dollarisation and diversification.
Looking ahead, the key variables shaping gold’s trajectory include trade negotiations between the U. S. and EU, the Mexican outcome, the U. S. inflation print, the Federal Reserve’s rate forecast, and evolving geopolitical flashpoints. Market participants remain poised on each iteration, with bullion positioned as a barometer of global confidence and risk appetite.
Gold speculators, meanwhile, are trimming positions; leveraged net‑long commitments dropped by roughly 1,855 contracts in the latest CFTC data, reflecting a cautious recalibration of bullish bets.
Reflecting on this environment, investors are weighing divergent forces. A firmer dollar or resilient bond yields could head off gains, yet escalating tariff threats and dovish policy shifts may underpin further upside. For now, gold maintains a central role as a hedge and an inflation‑linked asset.
Topics
Live News