Pressure on Gold

In the United States, the average number of initial jobless claims rose slightly from 220.75K to 221.75K as of August 8. This indicates small changes in the job market amid different economic conditions. The Euro/US Dollar pair faced pressure, slipping below 1.1650 as the US Dollar gained strength, boosted by positive economic reports. Similarly, GBP/USD dropped to daily lows near 1.3530-1.3520, also due to the stronger Greenback. Gold is under selling pressure, hovering around the $3,330 mark per troy ounce. This is mainly due to the rising US Dollar and increased US yields. Bitcoin also corrected after reaching a new high of $124,474, now settling at $121,615.

Threat of Trade Conflicts

Signs indicate that the US trade conflict may escalate, potentially reducing global output by about 0.7 percentage points in the medium term. This situation highlights the importance of carefully planning investment strategies, especially in unstable markets, to effectively manage risks. With jobless claims steady at 221.75K, the US labor market seems stable enough for the Federal Reserve to keep its current approach. The July 2025 Consumer Price Index (CPI) showed that inflation remains at 3.1%, giving the central bank little reason to reduce rates. This supports our outlook for a strong US Dollar in the near future. Given the dollar’s strength, we expect currency pairs like EUR/USD and GBP/USD to weaken further. The Euro is particularly at risk, as the manufacturing PMI for the Eurozone on August 1, 2025, showed a contraction at 48.5 for the second consecutive month. We believe buying put options on these pairs could be a smart move to protect against or profit from a continued decline. Gold’s challenges near the $3,330 level are closely linked to the strong US dollar and rising bond yields. The 10-year US Treasury yield reached 4.95% this week, a high not seen since inflation fears in 2024, making gold, which does not yield returns, more costly to hold. We are considering shorting gold futures or buying puts as this pressure is likely to persist. For Bitcoin, the recent drop from its record high above $124,000 indicates a period of consolidation or increased volatility. Open interest in Bitcoin perpetual futures on major exchanges has decreased by 15% from its peak last week, suggesting that some traders are closing positions. We think a long straddle, which involves buying both a call and a put option, could be an effective strategy to take advantage of the expected price fluctuations. The prospect of heightened trade conflicts significantly influences our overall market outlook. This situation resembles the tariff disputes of 2023 and 2024, a time when the VIX index often surged above 25. Therefore, holding some VIX call options or other broad market hedges might be wise to safeguard our portfolio against sudden shocks. Create your live VT Markets account and start trading now.

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