The gold prices jumped higher to 3423.18 per ounce before the retracement early this morning due to many geopolitical tensions rising overnight and shaking the Federal Reserve’s independence.
Russia-Ukraine Issue: According to Kyiv’s data, last night’s battle can be considered as the second-largest barrage of the entire war, with at least 21 people killed, and this also escalated to a boom on Europe and the UK’s buildings. This caused not only some tension between Russia and Ukraine, Europe and the UK will respond.
Ukrainian drone attack on Russia’s oil, while damage was also done to Ukraine’s many regions. This also pushes the gold prices and oil prices higher in response.
Reimpose sanctions on Iran: The three European countries (E3), such as the United Kingdom, France, and Germany, commit to reimposing sanctions on Iran over the nuclear program once again, which also opens some path for more tension in the market.
Although the diplomatic negotiation still exists in the current context—30-day window will be open before implementation—the current signals are leaning toward a more pessimistic outlook on this war. In fact, Iranian Foreign Minister Abbas Araghchi rejected the E3’s decision as “unjustified, illegal, and lacking any legal basis”, according to an ALJAZEERA source.
Weak Economic Data: Despite having a stronger GDP in the second quarter, which also pushed the gold prices in the first reaction, we are also seeing some slackening in the labor market conditions, while the pricing tends to become less persistent. All of these could potentially support the next FED rate cut in September.
The Federal Reserve’s Lisa Cook: The FED’s Cook requests a temporary order on her case while challenging Trump’s accusation back in an attempt to save her position. However, Trump also stated that he found “there was cause to remove FED’s Cook—aka evidence.”
—> threatening the FED’s independence.
—> hearing on Friday at 10 AM ET (around 9 PM Cambodia Time)
Other Fed members addressed labor risk and supported having a 25 bps rate cut in September, albeit a 50 bps cut is currently off the table.
To conclude, all of these are causing the market to become more sensitive and result in a higher gold price last night.
