Gold (XAU/USD) is rising as the US Dollar weakens after President Trump announced new tariffs. The tariffs include a 30% charge on imports from Iraq, Libya, and Algeria, and a 20% levy on imports from the Philippines. The upcoming FOMC Minutes are expected to clarify the Federal Reserve’s policy on interest rates. The Fed decided to keep rates steady in June, buoyed by strong job market data.

Strong Job Market

The latest Nonfarm Payrolls report shows that the job market remains strong, which is pushing up yields and strengthening the Dollar. Since gold usually moves in the opposite direction of the Dollar and interest rates, rising yields are reducing its appeal. Currently, there’s a 62.9% chance that the market expects a 25-basis-point rate cut in September. President Trump continues to criticize Fed Chair Jerome Powell, urging him to resign for not addressing rate cuts. Trump’s tariff policies also propose a 50% tariff on Copper and a staggering 200% on certain pharmaceuticals. With notices about new tariffs being distributed globally, economic concerns are growing. Gold prices are around the 38.2% Fibonacci retracement level at $3,292. There’s resistance at several points including the 23.6% retracement at $3,372. The RSI indicates that bearish momentum could push prices down further if gold stays below key moving averages. Tariffs, which differ from taxes, are placed on imports to make local businesses more competitive. Economists are debating whether tariffs protect industries or risk escalating trade wars. To support the US economy, Trump plans to use tariff revenues to lower personal income taxes. He is focusing on countries like Mexico, China, and Canada, which account for 42% of US imports, to revise these tariffs. While gold’s recent strength may be due to reactions to foreign policy changes and a weaker dollar, the situation is more complex. The reasons for recent market changes extend beyond simple headlines. Trump’s tariff increases—especially affecting countries in North Africa and Southeast Asia—have quickly adjusted trade expectations. This isn’t just about changes in pricing but triggers a ripple effect impacting inflation, risk sentiment, and interest rate expectations.

Expectations for Rate Cuts and Market Reactions

The current 62.9% chance of a September rate cut isn’t set in stone; market projections can change rapidly with new economic data. For instance, last week’s Nonfarm Payrolls report was stronger than expected. Strong employment generally supports higher—or at least steady—interest rates. Typically, higher yields strengthen the Dollar and put pressure on gold, but this time the Dollar has weakened, likely in response to geopolitical trade tensions rather than job numbers. Although Powell has decided to keep rates unchanged for now, ongoing pressure from the administration, notably demands for his resignation, suggests a strain on the Fed’s independence. This tension complicates short-term decisions. When political discussions influence monetary policy, it creates uncertainty for traders. Technically, gold approaching the 38.2% Fibonacci retracement at $3,292 raises concerns for those holding long positions. Weak RSI readings imply that this upward move might be short-lived unless gold rises above its moving averages soon. Resistance at $3,372 might limit upward movement unless bond markets anticipate more aggressive monetary support. Different tariffs impact various sectors differently; a 200% tariff on pharmaceuticals is not the same as one on copper. The motives seem more political than economic. Even amid this turmoil, markets expect the Fed to react to trade-related weaknesses by easing policy, even if current data doesn’t clearly support such action. This tension between fiscal measures and monetary policy should be carefully analyzed. What’s crucial now is how rate futures respond to unfolding trade measures. If the market dismisses a rate cut in September, gold prices may fall. On the flip side, if inflation due to tariffs reduces consumer spending and GDP forecasts, bond yields might decline, benefiting precious metals. It’s essential to observe how markets anticipate the Fed’s response to the White House rather than how the Fed acts independently. The effects of balancing tariffs with domestic tax reductions are still speculative. Whether these measures maintain consumer purchasing power depends on their timing and scope. Markets may react differently than policymakers expect. Assets closely tied to macroeconomic factors—like gold or interest rate products—will reflect these market dynamics directly. It’s vital to monitor current positioning and how prices behave around key levels. Often, reactions tell a clearer story than predictions. Traders should remain vigilant for any significant divergence between yields and metals, as that gap typically doesn’t last long. Create your live VT Markets account and start trading now.

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