Gold prices lost their shine today after the sealing of the U.S. and Japan trade deal calmed global economic fears.
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Gold futures were down 0.3% to $3,434.50 per ounce in early trading, while spot gold was muted at $3,422.89 per ounce.
Tariffs Talks
The Japanese deal will mean that goods sold from Japan to America will be taxed at 15% below the 25% rate Trump had threatened would be imposed on August 1. That includes tariffs on vehicles and car parts.
As part of the deal Japan has agreed to invest $550 billion in the U.S. If other countries agree to such a spend then this could open the floodgates to more U.S. trade deals in the days leading up to August 1 and beyond. There are some big hitters still to find a solution.
“The U.S. Treasury secretary said that he would resume trade talks with China next week, ahead of the August 12th deadline for negotiations. This suggests that the U.S. is more focused on agreeing a deal with China, rather than the EU. The EU has until August 1st to reach a trade agreement, otherwise, it will be subject to 35% tariffs,” said Kathleen Brooks, research director at XTB.
If so, it lowers the threat of high tariffs being imposed on countries around the world with the subsequent threat to economic growth.
This uncertainty has largely led to a huge spike in demand for gold and the gold price over recent months.
That’s because gold is seen as a safe haven in times of economic and geopolitical stress and strife.
Dollar Doubts
“If further trade deals are signed ahead of 1 August, this could further boost general risk appetite and reduce the demand for gold,” CM Trade chief market analyst Tim Waterer said. “But if the USD remains pressured this will keep a return to $3,500 a viable near-term prospect for the precious metal.”
That dollar comment relates to concerns over the weak currency which has plummeted in value this year. Part of the pressure on the currency is uncertainty over the direction of interest rates, pressure from President Trump on the independence of the Federal Reserve and concern that his big beautiful bill will add to U.S. debt.
Worries over geopolitical events in the Middle East, Asia and Europe also remain and could be a further driver for the gold price in the months ahead.
It is why analysts still feel bullish about the gold price, as can be seen by the consensus below.
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