Gold Pulls Back as Dollar Dominates Despite Global Tensions
Saturday, July 19th 2025
In a surprising turn for the precious metals market, gold prices slipped for the second straight session on Tuesday—even as Middle Eastern turmoil intensified. The traditionally reliable safe-haven failed to gain traction, overshadowed by a powerful resurgence in the U.S. dollar that suppressed bullish momentum.
A Strong Dollar Disrupts the Safe-Haven Narrative
At a glance, geopolitical unrest—particularly the ongoing and unresolved Israel-Iran conflict—should have buoyed gold prices. Yet, gold futures for August delivery closed at $3,403.30 per ounce, down $14.40 or 0.43%, reflecting how sharply market sentiment pivoted in the face of dollar strength. The dollar index surged by 0.74%, landing at 98.879, a move significant enough to offset risk-driven inflows into gold.
The contrasting movements—gold’s decline versus the dollar’s rise—underscore a critical dynamic in global markets: currency strength can overpower even the most compelling geopolitical backdrops when it comes to price movements in commodities like gold.
De-escalation Prospects Shift Sentiment
Traders initially positioned for continued gold gains as Middle East tensions escalated. However, when signals emerged that Iran might entertain diplomatic resolutions, bullish bets on gold quickly unwound. The market’s reaction reveals how hypersensitive precious metal pricing remains to even subtle shifts in the geopolitical narrative.
Profit-Taking and Technical Resistance Add to the Decline
According to Peter Cardillo, chief market economist at Spartan Capital Securities, the dip in prices can be attributed not only to dollar gains but also to technical profit-taking. “The fundamentals haven’t changed—central banks are still accumulating gold,” Cardillo said, implying that the latest price movement is more of a short-term pause than a directional shift.
Long-Term Bullishness Remains Intact
Despite this temporary setback, long-term enthusiasm for gold remains robust. Cardillo reiterated his view that gold is still the premier hedge in uncertain times, suggesting that prices could eventually surge to $5,000 per ounce. His confidence hinges on enduring themes such as monetary policy uncertainty, inflation risks, and continued central bank gold accumulation.
An Unexpected Dollar Rally Amid Weak U.S. Data
Ironically, the dollar’s recent rally comes in the wake of disappointing U.S. economic data. Retail sales underperformed expectations, following the previous week’s soft inflation numbers. While such data usually exerts downward pressure on the dollar, investors interpreted the slowdown as unlikely to shift the Federal Reserve’s immediate policy stance, which in turn lent support to the greenback.
All Eyes on the Fed’s Next Move
Investors are now keenly focused on the outcome of the Federal Reserve’s upcoming July policy meeting. While rate hikes are off the table—Fed funds futures signal a 99.8% chance of no change—traders are bracing for any surprises in the Fed’s “dot plot,” which could alter expectations for future rate cuts or policy tightening.
How policymakers frame their outlook could shape not only the next leg for the dollar but also gold’s medium-term direction.
Conclusion: A Pause, Not a Pivot
This week’s decline in gold prices shouldn’t be mistaken for a bearish reversal. Rather, it appears to be a technical pause prompted by near-term currency strength and profit-taking, against a backdrop that still supports long-term gains. As the Fed’s tone, global diplomacy, and macroeconomic indicators continue to unfold, gold may yet find its footing and resume its march toward new highs.
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