FTSE 100 today: Index gains as healthcare stocks surge; UK manufacturing PMI falls
After reviewing the movements of the gold futures across different time charts, I find that the gold futures have finally tested the upper limits amid surging optimism for a Federal Reserve interest rate cut later this month. Last week’s softer-than-expected US Jobs report pushed the futures to test a record high of $3653 on Friday.
However, Monday’s gap-down start at $3630 indicates growing bearish pressure due to increasing skepticism over the upcoming Supreme Court verdict on Trump’s plea to overturn an appeals court decision that found most of his tariffs on imports from other countries illegal.
Generally, the Supreme Court could take as long as early next summer to issue a decision on the legality of Trump’s tariffs but I find that such scenario likely to cap the upside of the gold futures as if the Supreme Court verdict keep the lower court ruling intact, Trump’s administration would be forced to issue massive refunds, which would be terrible for the Treasury.
I find that the movements of the gold futures will remain indecisive as the gold also benefited from increased safe haven demand since the beginning of Trump’s 2.0 as he used his emergency powers to shift the global economic equation in favor of the United States but his attempts generated extreme fear among his trading partners, resulting in a panic buying spree in gold that supported this rally to continue since Trump won the presidential election in Nov. 2024.
But, now this rally seems ready to steam out as extending hopes of Supreme Court’s verdict will over ride the other causative reasons to further stretch this rally above this point as the extreme buying by the central banks have over swallowed their gold piles as they have contributed 23% to total annual gold demand in 2022-2025, double the average share recorded during the 2010s.
On the other hand, most of the countries are attempting to de-dollarize to end their dependence on the U.S. dollar, looks quite supporting for the gold bears as the global central banks could start to sell some part of their extra portion of their gold reserve to boost their currencies which started to weaken since the advent of this panic buying spree in gold if the U.S. Supreme Court doesn’t favor the U.S. President Donald Trump.
Undoubtedly, some advanced clues could be present to confirm the pace of justice on the tariff front, along with expectations for interest rate cuts or attempts by Asian and European nations to boost their economies, amid concerns about the potential denting impact of the trade tariff tussles.
I anticipate that, despite the fact that the currently prevailing geopolitical concerns could provide some additional push to safe-haven demand; the overextended price of gold has eroded its safe-haven potential, while most central banks have already accumulated gold in their reserves.
Disclaimer: Readers are advised to take any position in gold at their own risk, as this analysis is only based on observations.