Gold extends losses as US Dollar, yields rise

LONDON (July 9) Gold (XAU/USD) is extending its decline on Wednesday for a second consecutive day as the US Dollar (USD) and US Treasury yields firm ahead of the release of the Federal Open Market Committee (FOMC) Meeting Minutes.

The US Dollar Index (DXY) is rising to its highest level in two weeks, pushing XAU/USD below $3,300 at the time of writing.

The upcoming release of the FOMC Minutes from the June meeting is expected to shed light on the Fed’s internal debate over the path of monetary policy. 

In June, the central bank opted to maintain its benchmark interest rate at 4.25% to 4.50%, citing a resilient labor market and lingering inflation pressures.

Last week’s Nonfarm Payrolls (NFP) report reinforced that outlook, showing continued strength in employment and reducing expectations for a near-term rate cut. As a result, yields have firmed across the curve, further strengthening the USD and weighing on Gold.

Gold typically shares an inverse relationship with the US Dollar and interest rates. When yields rise, interest-bearing assets become more attractive relative to Gold, which does not offer a yield. This dynamic has continued to pressure bullion in recent sessions.

Trade prospects and tariff extension dampen Gold’s short-term appeal

Letters outlining the reciprocal tariff rates that the Trump administration aims to impose on imports to the US continue to be sent to trading partners of the World’s largest economy. 

This has reignited concerns over the potential economic implications of the levy increase. 

The latest news that the European Union (EU) and the United States (US) are making progress in trade talks has provided additional support for the Greenback. 

However, with the new rates expected to take effect from August, the three-week extension has increased the hopes that more trade deals between the US and its major counterparts could be announced. This has weakened the short-term appeal of bullion.

Daily digest market movers: Gold hinges on Fed outlook and trade policy

• According to the CME FedWatch Tool, markets are pricing in a 62.9% probability for a 25-basis-point rate cut in September. So far this year, the Fed has maintained interest rates within the 4.25%-4.50% range, supported by a resilient labour market. 
• Meanwhile, President Trump continues to criticize Fed Chair Jerome Powell. On Tuesday, Trump called for his “Immediate resignation”. On Truth Social, Trump stated, “Rates should have been cut months ago. The only reason they’re not is because Powell doesn’t want me to win.” These remarks reflect Trump's long-standing frustration with Powell, which began during his first term and has intensified as monetary policy remains tight. 
• On tariffs, the Trump Administration has hinted at imposing a 50% tariff rate on Copper imports to the US and a potential 200% levy on pharmaceutical products.
• At a Cabinet Meeting on Tuesday, Trump reiterated that there would be no further extension to the fresh tariff deadline on August 1. “Everybody has to pay. And the incentive is that they have the right to deal in the United States. ”Trump wrote on Truth Social that “TARIFFS WILL START BEING PAID ON AUGUST 1, 2025. There has been no change to this date, and there will be no change.” 
• On Monday, 14 letters were sent to countries, including Japan and South Korea, outlining the fresh tariff rate. On Tuesday, US Commerce Secretary Howard Lutnick told CNBC that an additional 15 -20 letters were scheduled to be sent to global leaders by Wednesday.
• Trump also threatened BRICS with an additional 10 % tariff. BRICS nations collaborate on various issues, including trade, investment, finance, and sustainable development. They aim to increase their influence in global economic and political affairs. The bloc also holds annual summits to discuss and coordinate strategies for mutual support and growth.

FXStreet