Gold futures soared on Wednesday, with the August contract gaining over $33, reaching $3,378 per troy ounce as of 6:15 PM ET. The rally extended into Asian markets, reflecting growing demand for the traditional safe-haven asset amid conflicting economic and geopolitical signals.
Why Is Gold Rising?
One of the primary catalysts behind gold’s bullish momentum is the weakened US dollar. Analysts like David Morrison from Trade Nation note that the greenback remains “overvalued by many measures.” A softer dollar typically boosts gold’s appeal for international investors, as it becomes cheaper in non-dollar currencies.
Moreover, the uncertainty around US trade policy, especially the enforcement of former President Trump’s “reciprocal” tariffs, is fueling safe-haven buying. A federal court has permitted these tariffs to remain in place pending further appeals, adding another layer of complexity to trade dynamics.
Diplomatic Progress with a Catch
In a notable diplomatic development, President Trump announced a tentative trade deal with China after two days of high-level talks in London. Under this framework agreement, both nations pledged to reduce export controls:
- China will ease restrictions on rare earth exports
- The US will relax controls on semiconductor exports
However, markets remain cautious. Beijing simultaneously imposed a six-month limit on rare earth export licenses targeting US automakers and manufacturers. This mixed messaging has left investors wary about the true stability of trade relations.
Gold Rises Despite Cooling Inflation
Interestingly, the rally comes despite weaker-than-expected inflation data in the US:
- May CPI rose only 0.1% MoM, down from April’s 0.2%
- Core CPI also slowed to 0.1% from a prior 0.2%, missing the 0.3% forecast
Traditionally, lower inflation would reduce the appeal of gold as an inflation hedge. But that’s not the full story.
Gold’s Role Expands Beyond Inflation Hedge
As Saxo Bank analysts point out, gold is increasingly being viewed as a hedge against broader uncertainty—not just inflation. Key drivers of current demand include:
✅ Central bank gold purchases
✅ Demand for US 10-year notes
✅ Safe-haven flows amid geopolitical unpredictability
✅ Currency instability concerns
What This Means for Traders
The surge in gold prices highlights a complex market sentiment. Even as US-China diplomacy shows progress, investors remain cautious about actual implementation. Combined with volatile inflation expectations and lingering geopolitical risks, gold remains a strategic asset in diversified portfolios.
📈 Key takeaway: Gold is no longer just a hedge against inflation—it’s a hedge against uncertainty itself.
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