(Bloomberg) — Gold rose to the highest level in more than a month as traders assessed the impact of tariffs on inflation and interest rates in the absence of relevant economic data.
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The dollar and bond yields pushed lower on Monday, helping send bullion as much as 1.5% higher. Bullion typically benefits when the greenback weakens and in a lower rate environment.
Macro funds have begun buying back their previously built short positions in gold, according to TD Securities. Bullion will see more upside, driven by catalysts including the trade war, resumed interest rate cuts, a stagflationary environment, and challenges to central bank credibility, commodity strategist Daniel Ghali said in a note.
Fed Governor Christopher Waller advocated for a rate cut last week and Governor Michelle Bowman also expressed an openness to a reduction. Meanwhile, their colleagues remained more cautious due to the risk of persistent inflation triggered by tariffs.
The divergence comes as Trump keeps up the pressure on Fed Chair Jerome Powell — whose term as chair expires in May 2026 — with the White House evaluating candidates to succeed him and pledging to pick someone who will cut rates. The president also pushed back on a Wall Street Journal report that Treasury Secretary Scott Bessent advised him markets would react badly if he fired Powell.
On the trade front, European Union officials are set to meet as early as this week to formulate a plan to respond to a possible no-deal scenario with the US. Investors will be watching for progress on talks with a raft of trade partners ahead of Trump’s Aug. 1 deadline for imposing so-called reciprocal tariffs.
Gold has climbed more than a quarter this year, with geopolitical tensions and concerns about dollar-denominated assets sparking a flight to the haven asset. The precious metal has been trading within a tight range over the past few months, as investors wait for a clearer sense on global trade talks, the path for rate cuts and the impact of tariffs on the global economy.
Spot gold was up 1.5% at $3,398.39 an ounce as of 11:53 a.m. in New York. The Bloomberg Dollar Spot Index edged lower. Silver, platinum and palladium all rose.
–With assistance from Yihui Xie and Jack Ryan.
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