Geopolitical Tensions Keep Weighing on Gold
As you might expect, the geopolitical tensions continue to simmer, providing a strong underpin for Gold. US President Donald Trump has been warning that a second military strike could be on the cards if Venezuela’s administration doesn’t start cooperating with US efforts.
Trump also made it clear that if Mexico & Colombia don’t do their part in reducing the flow of illicit drugs coming into the US, they could be facing some military action too.
To top it all off, Saudi Arabia has hit back at the UAE, publicly accusing it of undermining their national security. The lack of progress in the Russia-Ukraine peace talks has also reinforced Gold’s appeal as a safe-haven, keeping investors on high alert.
Dovish Fed Expectations Weigh on the US Dollar
On the economic front, US Manufacturing PMI has been mixed, strengthening expectations that the Fed will take a more cautious approach.
For example, S&P Global reported that US Manufacturing PMI stayed at 51.8, it’s still expanding but at a slower rate. Meanwhile, the ISM Manufacturing PMI dropped to 47.9 – a sign that business activity is actually contracting. Traders are still expecting the Fed to cut interest rates two more times this year.
On top of that, worries about the Fed’s independence under President Trump are taking their toll on the US Dollar. And with a softer dollar, gold is getting a boost – after all, the yellow metal tends to rise when the Dollar is on the back foot.