Iran has demonstrated flexibility and a preference for diplomacy in geopolitics, as seen by its UN representative’s statement that Tehran is amenable to establishing a regional nuclear consortium should an agreement be reached with Washington. The likelihood that the Israel-Gaza conflict would finish in two weeks, according to Al Arabiya, adds to the positive atmosphere.
Additionally, the UK government said in a press release today that the trade agreement between the US and the UK had formally entered into force. A 10% tariff quota has been lowered for UK automakers exporting to the US. 10% tariffs on products like engines and aircraft parts will be eliminated for the UK aerospace industry. The allure of gold as a safe-haven is waning due to the more tranquil geopolitical environment. It appears that traders are more concerned with pursuing yield than they are with maintaining hedges.
The release of the PCE report in July or September was another major factor that prompted investors to place bets on a potential rate drop by the Fed. Prices increased 2.7% in May compared to the previous year, which was slightly more than the 2.6% forecast, according to the Fed’s preferred inflation indicator.
However, the Federal Reserve will likely lower rates more frequently and sooner than anticipated due to some U.S. statistics suggesting a weaker economy, which caused the dollar index to retrace last week to 3-year lows below 98 levels. A week ago, traders were pricing in cuts of 46 basis points; now, they are pricing in 65 basis points by year-end.
The announcement by U.S. President Donald Trump that the United States was terminating trade negotiations with Canada and that he would think about bombing Iran once more damaged risk appetite and caused equities to fall. The dollar has weakened further due to reports that U.S. President Donald Trump may name a successor to Powell in the upcoming months. By serving as a shadow chair before Powell’s tenure ended in May, an early nomination might weaken Powell’s influence. The future Fed chair is anticipated to be more dovish.
When combined, these messages demonstrate Trump’s unpredictable nature and the ease with which any presumptions incorporated into markets can be disproved. Trump also indicated he might think about bombing Iran again if Tehran is enriching uranium to alarming levels, harshly insulted Iran’s Supreme Leader Ali Khamenei, and cancelled plans to relax sanctions on Iran.
As international traders reexamine the “American exceptionalism” that has attracted investment to the nation, the long-term future for the dollar is viewed as difficult. After Russia invaded Ukraine in 2022, former President Joe Biden blocked its access to the U.S. dollar, froze its assets, and levied penalties, which prompted other nations to hasten their transitions away from reliance on the U.S. dollar.
Gold Aug Futures Daily Chart
For the past six months, gold August prices have been receiving support at the uptrend line. Gold needs to rise above $3300 (~Rs 96000) for a positive continuation; if it does, $3400 (~Rs 98500) will be the next resistance. However, the next major price floor will be around $3200 (~Rs 92500) if gold fails to consolidate at present price levels and drops below $3270 (~Rs 95000).
Silver Sep Futures Weekly Chart
Silver Sep is currently trading between $35 (about Rs 105,000) and $37 (about Rs 108,500). If current positive momentum continues over the ATH, the next target is $38 (~Rs 111,000), with support at $35.5 (~Rs 104,000).
Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
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