Gold Prices Shine Amid US Economic Woes and Global Trade Tensions

Wednesday, August 6th 2025

Gold continues to gleam in early August, bolstered by soft U.S. economic data and escalating global trade risks. The yellow metal has now logged four straight days of gains, fueled by a combination of weak employment data, disappointing service sector performance, falling U.S. yields, and renewed concerns around tariffs.

Gold Rallies as US Economic Indicators Falter

Spot gold climbed to $3,389, gaining roughly 0.45% on the day, while the MCX October gold contract traded higher at ₹101,540, up 0.33%. The rally comes on the back of another troubling batch of U.S. economic data released Tuesday.

The ISM Services Index for July came in at 50.10, missing expectations of 51.50, marking a two-month low. Worse yet, the employment component dropped to 46.40—its weakest level since January 2022—suggesting a deepening contraction in hiring. Price pressures also surprised to the upside, with the prices paid index jumping to 69.90, well above the forecast of 66.50.

Labor Market Cracks Deepen

Earlier, the July nonfarm payroll report painted an even grimmer picture. Revisions slashed job gains by 258,000 over the previous two months, dragging the three-month average job creation down to just 35,000, far below the 100,000 threshold needed to maintain employment levels.

These back-to-back disappointments have not only rattled markets but have also reignited bets on a September Fed rate cut, which is lending more support to gold prices.

Tariff Tensions Resurface: A New Tailwind for Gold

Beyond economic concerns, geopolitical developments are also keeping investors on edge.

President Trump hinted at new tariffs on semiconductors and pharmaceuticals, with rates potentially as high as 250%.

India is facing threats of a substantial tariff hike within 24 hours.

Meanwhile, hopes for a renewed U.S.-China trade truce are hanging in the balance.

The Brazilian President, Lula, announced plans to take Trump’s tariffs to the WTO for challenge.

Despite some softening with Japan and Europe, countries like Switzerland, South Africa, Taiwan, and India are in the firing line, with tariffs ranging from 20% to 39% on certain exports.

These developments have further heightened demand for gold as a safe-haven asset and alternative monetary anchor in a fractured trade environment.

Falling Yields and a Weaker Dollar Add More Fuel

As U.S. economic signals dim, Treasury yields continue their retreat:

10-year yield: 4.19% (lowest since July 1)

2-year yield: 3.71% (lowest since May 1)

Meanwhile, the U.S. Dollar Index has declined for the third consecutive session, now at 98.70, reflecting growing investor anxiety about the American economy’s trajectory.

Investor Positioning and Market Sentiment

Gold ETFs are seeing steady inflows, with total global holdings at 91.77 million ounces, inching back toward their 12-month peak of 91.783Moz. Year-to-date, gold ETF positions have increased by 10.75%, showcasing growing institutional interest.

However, speculative futures positioning has turned slightly cautious:

Long-only positions dropped by 26,079 lots to 178,435.

Short-only positions rose to 35,589 lots—the highest in five weeks.

Net-long positions fell to a three-week low of 142,846.

This mixed sentiment may hint at underlying consolidation, even as macro conditions favor upside.

The Switzerland Loophole and COMEX Arbitrage

Despite the U.S. slapping 39% tariffs on Swiss exports, gold has been exempt, likely due to its status as a critical asset. Switzerland exported over $36 billion worth of gold to the U.S. in Q1 alone—making up more than two-thirds of its trade surplus with the country. Arbitrage opportunities between COMEX futures and international spot prices helped drive those flows, especially as fears swirled about possible tariffs on gold itself.

Looking Ahead: Key Events and Technical Levels

This week is relatively light on U.S. data releases, though investors are eyeing the following on August 7:

Weekly jobless claims

Preliminary Q2 nonfarm productivity

Unit labor costs

Gold’s price action remains rangebound between $3,250–$3,450, but momentum is leaning bullish. With the metal only 4% off its record high of $3,500, even modest catalysts could push it to retest historic levels.

Mounting political risk is also in play: President Trump’s recent dismissal of the BLS Chief following the payroll data revision, and the pending replacement of Fed Governor Adriana Kugler, opens the door for a more dovish Fed, further supporting gold.

Trading Strategy: Buy the Dips—Unless Trade Truce Surprises

In the current climate, buying gold on dips remains the favored approach, barring a breakthrough in U.S.-China trade talks. Technically, gold finds support at: