US Trade Announcement Leaves Gold on Tenterhooks

A reprieve in the trade deal deadline weighed on gold as the dollar gained after the US budget passed, with markets wondering if the trade war has reached its end.

The Day of Big Deals Impacted the Buck

US President Donald Trump made multiple announcements on Friday that would impact global markets, despite the US being on holiday. , the budget for fiscal 2025, allayed fears that Congress wouldn't come to a spending agreement. The bill increased the debt ceiling by a further $5 trillion, providing funding for the government until after the midterm elections. The initial market reaction was mildly positive, as it removed some uncertainty. However, the dollar continued its downward slide as the increase in deficit spending is suspected of contributing to a decline in the value of the greenback.

What kept investors nervous was the pending deadline for trade deals on 9 July. that the markets have yet to interpret properly. White House officials also said over the weekend that they were finalising "several" trade deals that would be announced in the coming days. Trump even provided additional relief, stating that the higher tariffs wouldn't take effect until August 1st, effectively extending the deadline. However, he also unveiled a new tariff policy that adds a 10% tariff to countries with "anti-American policies", specifically mentioning the BRICS nations. Additional uncertainty stemmed from the announcement that, starting on Monday, to adjust the tariff rates certain countries would pay, effective August 1st. Trump said he had made deals with some countries, while others will just get the "letters", but there hasn't been any clarity on which countries and how much the new tariffs would be. These announcements tended to overshadow a sign of de-escalation in the trade war with China. Three companies announced that the and ethane products used in semiconductor manufacturing.

More Progress Or More Trouble Ahead?

Countries are treating the move as . US Treasury Secretary Scott Bessent clarified on Sunday that the aim of the letters is to accelerate deals by applying "maximum pressure". He cited the EU as an example as negotiations continued through the weekend. The EU faces tariffs of up to 50% if a deal is not reached, but Bessent noted that there had been "good progress" and expected a deal within a few days. So far, only the UK and Vietnam have signed deals, and it's expected that as many as 12 more countries will announce reaching an agreement on Monday.

The prospect of lifting trade uncertainty in the near term appears to have , as it traded in the red at the start of the week. The spot price of gold fell 0.6% to $ 1,314 per ounce during the Asian session as the dollar recovered over the weekend, bolstered by the trade war reprieve and expectations that the Fed will keep rates elevated amid the inflationary effects of the tariffs. Two-thirds of markets expect .

Gold Price Action Points to Triangle Breakout

Price action in gold remains contained within the $3290-$3460 ‘autorend’ trendlines, which resemble a symmetrical triangle pattern. With short-term resistance at the 20-day VWAP of $3360 triggering a pullback, a continuation to the downside could break the regional support at the $3250 swing and expose the next low at $3125. However, if the bullish continuation pattern eventually plays out and momentum boosts prices above the record high of $3500, the measured move projection suggests a 13% upside from the breakout point.

Source: SpreadEx | Gold Spot

Key Takeaways

A stronger dollar amid the passing of the US budget and a reprieve in the trade deal deadline weighed on gold prices. President Trump announced that multiple trade deals were being finalised, though he extended the tariff deadline to 1 August as uncertainty over which countries these were and the new rates remained. While some progress has been made with the UK and Vietnam, the US aims to accelerate more agreements by applying "maximum pressure". A new 10% tariff policy for countries with "anti-American policies" was unveiled, while the EU faces potential tariffs of up to 50%, but making "good progress".