- The price of gold records modest profits around $ 3,350 in the first Asian session on Monday.
- Economic uncertainty and lower interest rates drive safe refuge flows, supporting the price of gold.
- The UOM survey could help limit gold losses.
The price of gold (Xau/USD) quotes with slight profits about $ 3,350 during the first Asian session on Monday. The uncertainty about commercial conversations will probably support the demand for safe gold refuge as the deadline of tariffs with the US is approaching. Operators will take more clues to the speech of the president of the Federal Reserve (Fed), Jerome Powell, later on Tuesday.
The US Secretary of Commerce, Howard Lutnick, said on Sunday that on August 1 it is the deadline for countries to begin to pay tariffs to the US. The deadline for tariffs of President Donald Trump has changed since he announced his strong taxes to the commercial partners on April 2, but the White House officials now maintain that August 1 is a firm deadline. Uncertainty and concerns about new tariff rates could boost the yellow metal, since the secure shelter asset is considered in uncertain times.
In addition, moderate comments from Fed officials could raise an asset without performance. The governor of the Fed, Christopher Waller, said Thursday that he continues to believe that the US Central Bank should cut interest rates at the July meeting before the growing risks to the economy. Analysts expect the Fed to maintain their current rates at the end of this month, with a 94% probability of maintaining them and 6% of a 25 basic points cut (PBS).
On the other hand, the renewed demand of the US dollar (USD) could weigh on the price of gold in dollars in the short term. The preliminary feeling of the consumer of the University of Michigan (UOM) rose to 61.8 in July from 60.7 in June. This reading was stronger than the 61.5 market expectation.
US Dollar – Frequently Questions
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
