Gold: Rising Yields and Stronger US Dollar Threaten $3,300 Support

Published 07/07/2025, 12:24
Updated 07/07/2025, 12:40

Gold prices kicked off the week on the back foot, falling around 0.9% by mid-morning London trade, as the US Dollar advanced across the board and Treasury futures fell for the fourth session. This comes after the yellow metal managed to post a relatively small 1.9% gain last week, snapping a two-week losing streak. But the broader picture hasn’t changed dramatically — gold remains in consolidation mode, digesting its historic run-up in the first half of 2025.

Much of this week’s focus will be on potential trade deals and tariffs, with the July 9 deadline now just two days away. But judging by gold’s recent price action, and the fact that US equity indices are at record highs, investors clearly don’t expect to see the sort of fallout that happened earlier in the year, and instead envisage either trade deals or agreements to extend talks with major partners.

Against this backdrop, there is a risk we could see gold prices pull back a little from what still is historically overbought prices on long-term charts of gold.

Could the July 9 Tariff Deadline Be a Volatility Trigger?

With a relatively light macroeconomic calendar this week, all eyes are on the July 9 reciprocal tariff deadline. US trading partners are reportedly rushing to finalize deals with the Trump administration ahead of this date.

While trade uncertainty has waned in recent months, the upcoming deadline is a key risk event that could reignite safe-haven demand. Conversely, a flurry of finalized deals, or at least agreements to extend talks, might remove one of gold’s recent supports, especially with equities at record highs and tensions in the Middle East cooling off.

Indeed, it is worth pointing out that gold has priced in a lot of risk that perhaps hasn’t materialized over the past couple of years. The metal has now logged gains in six of the past seven quarters, returning more than 75% over that period.

But since hitting its record high of $3,500 in April, the metal has mostly drifted sideways, hinting at exhaustion near those elevated levels. Without a major macro or geopolitical spark, a sustained breakout above $3,500 may prove elusive in the near term.

Chinese Central Bank Gold Buying Continues

One of the most important short-term drivers of gold has been China’s central bank gold purchases. For the past eight months, the People’s Bank of China (PBOC) has consistently added to its gold reserves, contributing significantly to gold’s upside.

This part of the wider concerns about a ballooning US fiscal deficit, with central banks and other institutions eager to hedge their bets in case the US defaults. The weakening of the dollar has also prompted to rethink of its reliance on US assets.

In June, bullion held by the PBOC rose by 70,000 troy ounces. This means that the central bank’s gold reserves have now climbed by 1.1 million troy ounces since the purchases began in November.

While the news hasn’t supported prices today, it is a reminder that the PBOC and other central banks remain important players in physical demand for gold, which is keeping the long-term outlook positive for prices. Even if the PBOC had paused its purchases, this wouldn’t have been surprising given the high price levels and previous buying spree.

But the fact that they didn’t pause means gold is slightly less vulnerable to a bout of speculative selling. A temporary break from Chinese accumulation might still be the case in July or in the coming months, but this alone will probably not derail the broader bullish trend, although it could catalyze a mini correction as markets reassess short-term demand.

Technical Analysis and Key Levels to Watch

Gold’s technical picture still favors consolidation rather than a trend resumption, but a lot can change this week. On the daily chart, though, gold is starting to break its rising trend line from early 2025, which points to some bearish momentum if key support at $3,300 breaks decisively this week. Otherwise, we could once again see a bit of a recovery and continued consolidation.Gold-Daily Chart

Key Levels to Watch

  • Support levels to watch: $3,300, $3,250, and deeper at $3,167
  • Resistance levels overhead: $3,325, $3,340, and $3,400

A break below the $3,300 region could accelerate a short-term pullback, especially if macro headwinds — such as a rebounding US dollar and higher bond yields — persist. But if volatility spikes around the tariff deadline or otherwise, the uptrend could reassert itself quickly.

****

Be sure to check out InvestingPro to stay in sync with the market trend and what it means for your trading. Whether you’re a novice investor or a seasoned trader, leveraging InvestingPro can unlock a world of investment opportunities while minimizing risks amid the challenging market backdrop.

Subscribe now for up to 50% off amid the summer sale and instantly unlock access to several market-beating features, including:

  • ProPicks AI: AI-selected stock winners with proven track record.
  • InvestingPro Fair Value: Instantly find out if a stock is underpriced or overvalued.
  • Advanced Stock Screener: Search for the best stocks based on hundreds of selected filters, and criteria.
  • Top Ideas: See what stocks billionaire investors such as Warren Buffett, Michael Burry, and George Soros are buying.

Summer Sale

Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

Read my articles at City Index

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.