The benchmark 10-year Treasury yield edged higher after four consecutive days of declines, reducing gold's appeal relative to interest-bearing alternatives. Traders are watching closely for developments from Washington, where Trump is expected to announce his nominee for a vacancy on the Fed's Board of Governors this week. The shortlist for a possible successor to Fed Chair Jerome Powell has reportedly narrowed to four candidates, heightening speculation over the future direction of U.S. monetary policy.
According to CME's FedWatch Tool, market pricing reflects an 87% probability of a Fed rate cut in September. Friday's disappointing jobs report added fuel to dovish expectations and prompted Trump to fire the head of the U.S. Bureau of Labor Statistics, introducing another layer of uncertainty. Gold tends to benefit from a lower-rate regime, which reduces opportunity cost and can weaken the dollar, boosting bullion demand.
Trade risks remain a key theme. Trump has once again threatened tariffs on Indian goods in retaliation for New Delhi's continued imports of Russian oil, adding geopolitical stress to the outlook. This provides a potential tailwind for gold, which remains a traditional hedge in politically uncertain environments.
On the physical front, Australia's Perth Mint reported a 33% month-on-month decline in gold product sales in July, while silver sales hit a six-month low. This soft demand contrasts with persistent investor interest driven by dollar weakness, tariff uncertainty, and inflation concerns.