Gold Prices Near Three-Week High Amid Trade Tensions
Gold prices hovered near a three-week high in mid-July, underpinned by trade tensions, with a focus on tariff levels to be set by the U.S. administration. A softer British pound against the dollar reflected fears of the impact of U.S. tariffs on U.K. economic growth, making dollar-denominated gold less affordable to UK-based savers.
Market Movements and Gold Value
Spot gold eased 0.6% to $3,326.62 per ounce on July 15.
Fears over the impact of U.S. tariffs on a number of economies have boosted the “safe haven” appeal of gold.
Trump’s Tariff Threats
President Trump threatened on July 12 to set a 30% tariff on imports from Mexico and the EU starting on August 1, if they failed to reach a trade agreement.
Inflation Data and Fed Outlook
Data on July 15 showed the U.S. Consumer Price Index rose 0.3% in June, meeting expectations, after edging up 0.1% in May. That was the largest gain since January.
The rise in inflation reinforced market expectations that the U.S. Federal Reserve (Fed) could hold off on any rate cuts in the very near term.
Trump Pressures the Fed
Some market analysts said, however, that President Trump’s pressure on the Fed to cut U.S. rates may be supporting gold.
Trump on July 14 renewed his attacks on Fed Chair Jerome Powell, saying interest rates should be at 1% or lower.
Rate Cut Expectations
Markets are pricing in 50 basis points of U.S. rate cuts by the end of 2025, with the first reduction expected in September.
Gold, often considered a safe-haven asset during times of economic uncertainties, tends to do well in a low interest rate environment.
British Economic Concerns
The British pound has softened on worries over the impact of trade tensions on the UK economic outlook.
Britain has a trade deal with the United States, but other countries have until August 1 to reach agreements with the U.S. administration, or risk getting large levies applied.
UK Economic Indicators and Outlook
Investors are looking more closely at the economic profile of Britain, where the country’s finances are again in focus, after the government could not deliver promised cuts to welfare benefits.
Data earlier in July showed the UK economy shrank for a second straight month in May.
An inflation report later in July is expected to show consumer price pressures continued to accelerate in June.
The Bank of England does not meet again until August, and presently money markets show traders expect a quarter-point cut to 4%, with one more cut before the end of 2025.
