Wall Street on the fence about gold’s direction, Main Street strengthens its bullish bias as debt worries mount

NEW YORK (July 4) A string of strong economic data releases was not enough to keep gold down this week, as geopolitical risks and sovereign debt concerns combined to drive the yellow metal higher despite renewed risk appetite.

Spot gold kicked off the week trading at $3,271 per ounce, and after a sharp dip down to the weekly low just under $3,250, gold began its steady ascent.

By 2:30 a.m. on Monday morning, spot gold was trading within $5 of the $3,300 level, and at 3:00 p.m. EDT, it succeeded in converting that level to support. By 8:30 a.m. on Tuesday, spot gold was trading at $3,356 per ounce.

This price level proved provocative for the bears, however, and gold prices spent the next two days trading between $3,330 and $3,355 before a late push Wednesday afternoon saw spot gold top out at the weekly high of $3,365 per ounce.

Following a retest of near-term support in the $3,345 area, another push higher during the Asian session ultimately failed, which resulted in gold's sharpest slide of the week just ahead of non-farm payrolls – from $3,350 per ounce at 8:15 a.m. EDT all the way to $3,312 just 15 minutes later.

The yellow metal saw a strong rebound thereafter, topping out at $3,337 per ounce by the North American equity open, and then trading in a relatively narrow $10 range heading into the 4th of July holiday.

The latest Kitco News Weekly Gold Survey showed industry experts on the fence about gold’s near-term prospects, while retail traders strengthened their bullish bias.

“Higher, said Adam Button, head of currency strategy at Forexlive.com. “The dollar initially rose on the non-farm payrolls data, then quickly reversed. That highlights the relentless trend of dollar selling that dominated the first half of the year. As that trend continues and extends, gold will benefit.”

“Higher,” said Rich Checkan, president and COO of Asset Strategies International. “The Big Beautiful Tax Bill… $4 trillion added to the U.S. debt in 10 years, along with the already anticipated $2 trillion per year. That is a ballooning debt of over $50 trillion by 2035… not even considering the Social Security Fund runs dry in 2033… best case scenario.”

“The world is waking up to the problems of overspending and debt,” he added, “and the solution: gold.”

“DOWN,” said Adrian Day, president of Adrian Day Asset Management. “There is a possibility that a confluence of negative factors–including some tariff deals and increased speculation on a July Fed rate cut–come together, amid a slowdown in central bank and non-official Chinese buying. Any pullback is likely to be shallow and short-lived.”

Colin Cieszynski, chief market strategist at SIA Wealth Management, believes the Federal Reserve is between a rock and a hard place.

“The Fed is stuck,” he said. “Inflation has come down, so the Fed by should have room to cut rates. The economy is strong, however, so usually you expect rates to rise when the economy is strong, because then inflation picks up.”

Cieszynski said that while the economy has not gone off the rails and tariffs have been absorbed so far, the act of cutting has effects that extend beyond the price of borrowing.

“The part they miss sometimes – especially the politicians – is the signaling effect,” he said. “If you start cutting, people don't think that's good times are here again. They see the liquidity part, which is what you do when you're in a recession, but you're not in a recession. If you cut rates aggressively, historically, the Fed does it in recessions, and the stock market goes up and the economy improves.”

“But if you cut rates into a strong economy, then that can stoke inflation,” he warned. “And you've got the tariffs kicking in, which also stoke inflation. The Fed is, I think, is still worried about that – not inflation now, but what inflation could look like a year from now if tariffs became inflationary, or if it cuts too aggressively when the economy's strong.”

While many market participants are frustrated with gold’s apparent inability to break higher, Cieszynski thinks the real story is the collapsing value of the greenback, which he believes is the major reason the yellow metal hasn’t seen significant declines.

“Euro/USD in the last six months is up 14%,” he noted. "The pound in the last six months is up 10%. The yuan in the last six months is up 8%. The Canadian dollar is up about 6%. Aussie's up 6%, same as Canada. These are massive moves for currencies in six months, and nobody's talked about it."

“We've seen gold go sideways for the last three months, and you'd think, given the apparent decrease in risk that has ignited that massive rally in the stock market, that gold would be down huge,” he added. “And it's not. If all these factors cause this magnitude of a move in the stock market, they should have caused the same magnitude move in gold. Gold should be way lower than it is right now. And it's not.”

“Gold is where you're seeing the tanking of the US dollar,” Cieszynski said. “The US dollar has tanked, and that's been good for stocks, but it's also meant that gold hasn't gone down as much as it should have.”

Cieszynski noted that markets are pricing 80 or so basis points of easing in 2025, and whether it’s a good idea or not, he thinks they may get their wish.

“That would be three rate cuts,” he said. “That's a possibility. They've got four meetings left. You could do September and December easily, and maybe they do one in July to appease Trump.”

But even if the Fed does cut early, Cieszynski doesn’t expect this will provide a big boost to gold or to the broader market. “I don't think it has any material change,” he said. “I think people are expecting it.”

This week, 14 analysts participated in the Kitco News Gold Survey, with Wall Street adopting a relatively neutral posture after the week’s flat performance on the week. Five experts, or 36%, expected to see gold prices rise during the week ahead, while four analysts, or 28%, predicted a price decline. The remaining five analysts, representing 36%, saw the yellow metal trading sideways next week.

Meanwhile, 243 votes were cast in Kitco’s online poll, with Main Street building on last week’s narrow bullish majority. 143 retail traders, or 59%, looked for gold prices to rise next week, while 49, or 20%, expected the yellow metal to slide lower. The remaining 51 investors, or 21%, saw prices consolidating once again during the week ahead.

After a week dominated by employment metrics, markets will a bit of a breather on the data front coming out of the Fourth of July long weekend.

On Tuesday, the Reserve Bank of Australia will announce its monetary policy decision. On Wednesday, markets will dissect the minutes from the Federal Reserve’s June FOMC meeting. And Thursday morning will see the release of weekly jobless claims.

Marc Chandler, managing director at Bannockburn Global Forex, sees continued weakness for gold prices after this week’s data.

“Stronger than expected US jobs data and the jump in interest rates cut short the budding recovery in gold,” he said. “The cash market looks likely to post an outside downside today, bearish price action. It warns the consolidative/corrective phase may not be over and a return to the $3,250 area seems reasonable, and maybe a little lower.”

Sean Lusk, co-director of commercial hedging at Walsh Trading, was trying to square the calls for rate cuts with the performance of the markets and the broader economy.

“Usually when you're cutting rates, it's because the economy's in trouble,” he said. “That's not the case. In a lot of ways, it’s unnecessary. I know there's a lot of pressure, and you’ve got a lot of Fed speech to cut, but once you do that, what's the point?

“They’re maybe worried about some private sector job creation, but I think a lot of companies have held back because of the uncertainty of the trade deals. But now there's some more clarity coming into the market. So you're going to cut rates with stocks at all-time highs? Enter into some easing policy?”

“I think they're really worried about real estate, and that’s [Trump’s] background,” Lusk added. “That's one sector where there's some concern and worry. There's a lag there because nobody can afford a mortgage, and when you’ve got houses moving, you’ve got projects going, you’ve got building, you’ve got this, you’ve got that… it just trickles down to a lot of different things.”

But he doesn’t see the point of cutting with the economy where it already is. 

“Even if we cut a half a point, what the hell's that going to do?” he asked. “You’ll get mortgages a little cheaper, but what about the rest of it? The inflation that you've conquered, it's going to come back. I'm confused as to why this is all the rage. Food prices have backed up, energy prices have subsided, and those are two core components of anybody's balance sheet. So you're going to ramp those up?”

“You're going to force yourself into the problem you came into office to solve.”

As for how all this impacts the gold price, Lusk said he still thinks the yellow metal is way too overbought above $3,300. 

“You're coming into a situation where you have more certainty,” he said. “The certainties are slowly catching up and maybe will eventually surpass uncertainty. For example, if you get trade deals done, if you get some more certainty as far as memorandums of understanding and frameworks for agreements, and if everyone in the business community knows what the baseline tariff is, then maybe private job creation picks up a little bit. That's one scenario. Then a lot of the risk goes out of the market at that point, I would think.”

“What are we doing up here? If you get a breakdown of $300 to $3,000, you're still on an uptrend,” he added. “We should go revisit some levels between $3,225 and the May lows at $3,123. That's probably where this should bend back to, all things being equal. We closed last year at $2,641, so a pullback to $3,141, $3,170 is probably where I think this would go. That’s 20% higher on the year.”

That said, Lusk still believes gold will rise further once again in 2025. “I think any pullback will be short-lived,” he said. “I think we're going to see further deterioration as we get later in the year.”

“Sideways,” said Darin Newsom, senior market analyst at Barchart.com. “I still see gold finding support as a safe-haven market, particularly with the next deadline for US tariffs being reinstated fast approaching (July 9? I’ve lost track). However, from a technical point of view, I find the daily chart of the August futures contract interesting. Here we see a sideways range between the high of $3,539.30 (April 22) and low of $3,151.00 (May 15), putting the midpoint at $3,345.20. The shorter-term sideways range is between $3,476.30 (June 16) and $3,250.50 (June 30) with a midpoint at $3,363.40. The August futures contract is priced near $3,343.00 early Thursday morning, near the midpoint of both ranges. For what that's worth.”

And Kitco Senior Analyst Jim Wyckoff also expects gold prices to churn sideways as the yellow metal continues to consolidate.

“Sideways and choppy,” he said. “Charts remain slightly bullish, but bulls need a new fundamental spark to push prices out of the recent trading range.”

KitcoNews

At the time of writing, spot gold last traded at $3,326.03 per ounce for a loss of 0.93% on the day but a gain of 1.76% on the week.