Gold prices paused on Monday after their steepest weekly fall in three months. The metal traded around $3,340 an ounce in early Asian hours, down 0.1 per cent at 8:35 AM in Singapore. The drop came after a 1.8 per cent decline last week, the sharpest fall since May.
Markets turned cautious as US inflation fears mounted and traders reassessed expectations of a Federal Reserve rate cut. At the same time, investors looked at geopolitical shifts that could influence safe-haven demand.
Tariff Strains Drive Inflation Concerns
The sharp move came after US wholesale inflation data showed the fastest rise in three years. The numbers, released last week, reflected tariff-driven pressures that lifted costs across the supply chain. Higher inflation reduced hopes for a September Fed rate cut. Gold, which offers no yield, loses appeal when interest rates stay high.
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Raphael Bostic, President of the Atlanta Federal Reserve, underscored this concern in comments to Bloomberg. He said that “tariff strains are real” and that high borrowing costs were cutting into corporate profits. Markets still expect as many as two Fed cuts before year-end. But the timing now looks less certain as the central bank balances inflation risks with growth concerns.
Trump-Zelensky Talks Ahead
Beyond inflation, geopolitics also weighs heavily on gold’s outlook. Traders are watching President Trump’s planned meeting with Ukrainian leader Volodymyr Zelensky. The talks are expected to shape a possible peace deal first raised in Trump’s meeting with Russian President Vladimir Putin in Alaska last week.
A ceasefire could ease safe-haven demand for gold. But if the conflict drags on, inflows into bullion could rise again. This geopolitical uncertainty adds another layer to gold’s volatility.
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Gold Near Record Highs Despite Setback
Despite its recent pullback, gold remains close to record highs. The metal touched $3,500 an ounce in April and has held near those levels since. Prices are still up more than 25 per cent this year. Strong gains reflect ongoing global risks, concerns about slowing growth, and central banks shifting away from the dollar.
Silver and platinum traded little changed on Monday, while palladium posted modest gains. The Bloomberg Dollar Spot Index also stayed flat, offering little direction for precious metals.
Inflation & Geopolitics
The future of gold now will be determined by how the Fed responds to inflation and what the market expects to be a softening. Trump’s tariff disputes and his foreign policy are making price pressures even more intense.
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Now the price of gold will depend on how inflation fears & Fed choices are balanced, whether gold can reach its historical highs or continue to consolidate near current levels.
