Gold firms as Fed uncertainty, China ETF demand offset yield pressure – Kitco AM Report

Alex Kuptsikevich, chief market analyst at FxPro, said the U.S. dollar has found a floor after stronger manufacturing activity and a renewed artificial intelligence bid helped pull capital back toward U.S. risk assets. He said the S&P 500 has approached a record high and the three-day increase in the market capitalization of the Magnificent Seven was the largest in history, reviving the “American exceptionalism” trade.

However, he added that the read-through for gold is mixed: a firmer dollar and higher yields cap upside, while uncertainty around the Fed’s new operating approach has kept bullion supported near the psychologically important $4,000 level.

Kuptsikevich said markets are still debating Warsh’s reforms, with the Fed chair seeking higher Treasury yields as a tightening channel for financial conditions and inflation restraint. Investors are responding by demanding more risk premium on Treasuries, pushing yields higher even as the central bank avoids an immediate hike. That policy passivity can weaken the dollar at the margin, but the same yield rise is a headwind for gold because it lifts the opportunity cost of holding a non-yielding asset. Kuptsikevich also cited New York Fed President John Williams’ view that policy is in the right place only as long as inflation behaves as expected, leaving another policy adjustment on the table if the inflation path changes.

The Strait of Hormuz situation is unresolved rather than fully de-escalated, but the immediate inflation-risk channel has eased. Iran maintains that it is not in talks with the United States, while also pointing to progress in its dialogue with Oman over reopening the Strait of Hormuz. A durable reopening would reduce the risk of another oil-price spike and lower the probability that energy inflation forces the Fed into additional tightening. Brent crude was trading near $84.82 a barrel, while Nymex WTI was near $80.78. For gold, the effect is two-sided: lower oil reduces inflation and rate-hike pressure, but fewer geopolitical tail risks also trim the haven premium.

Traders are watching the JOLTS job openings report at 10:00 a.m. ET today, ADP employment at 8:15 a.m. ET Wednesday and the July employment report at 8:30 a.m. ET Friday. The next major inflation test is July CPI on Aug. 12. A firm labor sequence would keep September hike pricing elevated and cap bullion rallies, while a clear cooling signal would shift attention back to the dollar and real-yield downside.

The key outside markets see Nymex WTI crude oil prices higher and trading around $80.78 a barrel, while Brent crude was near $84.82. The U.S. dollar index is firmer after recent weakness. The yield on the benchmark 10-year U.S. Treasury note is trading near the 4.7% area.

Technically, spot gold bulls’ next upside price objective is to push prices back above the $4,073.40 to $4,100.00 resistance zone, with a sustained move targeting $4,138.00 and then $4,200.00. Bears’ next near-term downside price objective is a break below $4,042.30, with deeper downside targets at $4,000.00 and then $3,979.00. First resistance is seen at $4,073.40 and then at $4,100.00. First support is seen at $4,042.30 and then at $4,000.00.

Spot silver bulls’ next upside price objective is to drive prices back above the $59.39 to $60.83 area, with a move above that zone targeting $65.53 and then $65.98. The next downside price objective for the bears is a break below $57.88, with deeper downside targets at $56.19 and then $55.00. First resistance is seen at $59.39 and then at $60.83. Next support is seen at $57.88 and then at $56.19.

Posted by:

Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com