Key takeaways:
● Gold had a
quiet and consolidating month in July, but the long-term outlook remains
bullish.
● Physical
gold demand is weakening in top-consuming nations due to high prices.
● Central
banks continue to be significant buyers of gold, though at a slower pace.
● Major gold
movements occurred in refining and trading hubs.
● U.S.
monetary policy expectations are the dominant driver of short-term price
action, with a recent shift to a dovish outlook likely to support gold prices
in the weeks ahead.
Overview
July was a relatively quiet month for gold, at least by the recent
standards. XAUUSD, the primary financial instrument for trading bullion,
fluctuated in a very narrow 30-dollar range between roughly 3,270 and 3,300 per
ounce (oz). This sideways trend, which has been in place since May, reflects a
state of continuing market uncertainty. While gold did not set a new high after
a strong performance in April, it remained comfortably above the $3,000 mark
and managed to stay above the critical 100-day moving average despite coming
close to breaching it. The previous month was notably calm, with no single
day’s price change exceeding 1.6%, a rare occurrence for the typically volatile
precious metal. Overall, investors and traders drove gold into a period of consolidation
as they continued navigating a landscape of persistent geopolitical tensions,
ongoing trade disputes, and shifting U.S. monetary policy expectations. Still,
XAUUSD experienced its first monthly decline since December 2024, albeit a
modest one of just 0.4%.
Although the general trading environment in the financial markets
was anything but calm, XAUUSD offered a rather smooth ride for traders, as it
was free from any significant market-moving events. We have singled out only a
few significant ones:
Major market-moving events:
● 1 – 2 July. Gold surged over 1.6% in two
days, as investors sought a safe haven following the U.S. Senate’s passage of a
major tax-cut and spending bill. This new legislation, which is expected to
create a $3 trillion deficit over the next decade, is widely believed to be
highly inflationary. In addition, gold prices firmed after a
weaker-than-expected ADP employment report fueled hopes of the U.S. Federal
Reserve (Fed) cutting rates sooner than anticipated.
● 11 July. XAUUSD
gained more than 1% in a single trading day after U.S. President Donald Trump
said that he would impose a 35% tariff on Canadian imports and announced plans
to impose blanket tariffs of 15% or 20% on most other trading partners.
● 21 – 22 July. Over the course of two trading
sessions, gold prices surged to a five-week high, gaining more than 2%. This
climb was largely driven by rising market uncertainty ahead of a 1 August
deadline, at which point the U.S. was scheduled to impose new tariffs on a
number of countries.
● 23 – 30 July. Over a week-long period, gold
prices declined steadily, primarily due to positive developments in
international trade and a lack of anticipated interest rate cuts. Initially,
the price of gold started to fall as progress was made on a trade deal between
the U.S. and the European Union (EU), which followed a similar agreement with
Japan. This easing of global trade tensions bolstered riskier assets like
stocks and strengthened the U.S. dollar, making gold less attractive to
investors. The decline was further exacerbated when the Fed, despite political
pressure, held interest rates steady and offered no clear timeline for future
cuts, which would have typically supported gold prices. Silver and other
precious metals like platinum and palladium also experienced significant price
drops throughout the week.
Fundamentals
Although gold entered a period of consolidation, the broader,
long-term trend is still decidedly bullish, as gold’s price remains comfortably
above key trendlines and MAs. Overall, chaotic U.S. trade policy, rising fears
about the sustainability of the U.S. twin deficits (fiscal and trade), endless
geopolitical tensions and political instability, and solid structural demand on
the part of central banks helped keep the bullion’s price near all-time highs.
Still, traders that continue to bet on future price increases should be
cautious as record-high prices seem to have already started to dent physical
demand for bullion.
China
As the world’s leading gold consumer, China’s purchasing activities
can influence global gold markets significantly. The latest statistic on
physical demand has been somewhat bearish. According to Reuters, net gold
imports by China through Hong Kong dropped by nearly 60% in June compared to
May, totaling 19.37 metric tons (mt). The import data aligns with a reported
3.5% decrease in China’s overall gold consumption during the first half of
2025.
India
India, the world’s second largest gold consumer, has also been
under stress lately, as record-high prices are significantly reducing demand
for gold jewelry. The World Gold Council (WGC) forecastsIndian
consumption will fall to a five-year low in 2025 and reach between 600 and 700
mt, a notable drop from the 802.8 mt consumed in 2024. Despite the overall
decline, investment demand for gold is seeing a boost, with inflows into Indian
gold Exchange-Traded Funds (ETFs) surging tenfold in June.
Switzerland
Switzerland’s crucial role in the global gold market is in refining
and trading. The country is home to some of the world’s largest gold
refineries, which process a significant portion of the world’s newly mined and
recycled gold. Therefore, its customs data on gold exports may shed light on
the overall demand situation.
Last month, Swiss Customs reportedthat gold exports
from the country surged 44% in June, reaching their highest level since March.
This increase was primarily driven by a significant flow of gold from the U.S.
to the UK, with the bullion passing through Swiss refineries. According to Swiss
customs data, exports to the UK alone jumped to 83.8 mt in June from just 16.0
mt in May. This trend of gold returning to London vaults comes after billions
of dollars’ worth of the metal were sent to the U.S. earlier in the year to
hedge against potential tariffs that were ultimately not imposed. The London
Bullion Market Association also reported a 2.1% month-on-month increase in gold
held in London vaults in June, reaching the highest level since August 2023.
Central Banks
Central banks have been purchasing gold to diversify their
reserves, lessen reliance on the U.S. dollar while also protecting against
inflation and economic instability. Currently, there are no reasons to expect
this trend to discontinue.
According to Bloomberg, the Peoples Bank of China (PBoC), China’s
central bank added gold to its reserves in June for an eighth consecutive
month. Other central banks, notably the Reserve Bank of India (RBI) and Bank of
Russia (BoR), also continued to stockpile gold. Overall, central banks around
the world bought over 400 mt of gold in the first half of 2025, according to
estimates from Octa, a global broker. While this is a substantial amount, it’s
actually about 20% less than what they purchased during the same period in 2024.
Still, central banks continue to be net-buyers of gold and in total provide the
largest source of demand for the bullion.
ETFs
Investors, both big and small, often buy gold-backed ETFs as a way
to easily add gold to their portfolios for diversification. These funds are a
key driver of demand in the gold market. Based on recent reports from the WGC,
gold ETFs globally experienced a total inflow of 74.56 mt, with funds in North
America accounting for nearly 60% of that increase (the date for July has not
been released yet). According to LSEG, a financial firm, flows into
physically-backed gold exchange-traded funds stood at just above 40 mt
year-to-date with monthly outflows recorded only in January and May. However,
there was also a minor outflow in the first week of July (see the chart below).
GOLD ETF MONTHLY FLOWS VS GOLD
PRICE
Commitment of Traders
Apart from central banks, global investors have also remained quite
bullish on gold. According to the Commodity Futures Trading Commission (CFTC),
large speculators (leveraged funds and money managers) were still net-long
COMEX gold futures and options as of 29 July, 2025. Long positions totaled
178,435 contracts vs only 35,589 short contracts, translating into a net-long
position of 142,846 contracts (see the chart below).
CFTC COMMITMENTS OF TRADERS VS GOLD
PRICE
‘Although large speculators remain
net-long, the size of their exposure is substantially smaller compared to what
it was back in September 2024, when the uncertainty around the U.S.
Presidential elections fuelled bullish bets’, says Kar Yong Ang, a financial
market analyst at Octa broker. ‘Still,
while long positions may have been cut, short positions are not being added.
Nobody wants to be caught shorting gold during these turbulent times’.
Outlook
Fundamentally, the outlook for gold looks bright, but there are
important caveats. We have singled out three important factors that will
continue to play out in August and the rest of 2025.
U.S. Monetary Policy
Given how strongly the market reacted to the recent NFP report, it
is clear that investors’ expectations regarding the U.S. monetary policy
continue to be the dominant factor driving gold prices. Until recently,
investors were growing increasingly skeptical about the Fed’s willingness and
indeed its ability to deliver additional rate cuts. However, the latest NFP
report, which showed a much smaller-than-expected increase in new payrolls in
July as well as a major downward revision in jobs creation for June,
essentially cemented dovish expectations for the rest of the year. Investors
now widely expect a 25-basis point (bps) rate cut by the Fed in September. They
also price in a roughly 60% probability of an additional rate cut in October
and a 47% probability of another rate cut in December.
‘With these dovish expectations in
place, XAUUSD is likely to remain supported in the weeks ahead’, argues
Kar Yong Ang. ‘However, inflation is a
major concern and the Fed is yet to communicate its readiness to cut the rate.
Tariff-related price increases are yet to be felt, and although U.S. consumer
1-year and 5-year inflation expectations have eased, they remain very high by
historical standards. I think some central banks, and maybe even the Fed, will
prefer to wait until trade tensions are resolved before committing fully to
rate cuts.’
Geopolitical uncertainty
Lingering global economic and geopolitical risks continue to play
out, with the ongoing trade negotiations between the United States and the rest
of the world, particularly China, being the most critical factor affecting the
gold market and the global financial system.
The conflicts in the Middle East, such as the Israel-Hamas
hostilities, brief spats between India and Pakistan, Israel and Iran, Thailand
and Cambodia, and the ongoing conflict between Russia and Ukraine, have
destabilised world politics and raised many fears ranging from oil and food
supply disruptions to the prospect of a worldwide conflict. Gold, considered a ‘safe-haven’ asset, typically sees increased demand during political
uncertainty and instability. While it is extremely difficult to project the resolution
of geopolitical conflicts, let alone to forecast the emergence of new ones,
peace negotiations in the hottest regions have already commenced. ‘Conflicting parties seem to have at least
started to talk. A cease-fire in the Middle East and Eastern Europe is now more
likely than it was only a month ago, but a lasting peace may take years to
achieve. Either way, any progress in negotiations or even a temporary cessation
of hostilities will improve risk sentiment and have a bearish impact on gold,’
says Kar Yong Ang, global broker Octa analyst.
Technical Picture
Kar Yong Ang comments: ‘At
the end of July, it appeared like gold was getting under heavy bearish pressure
and it looked like it was about to finally escape its two-month trading range
and break below the 100-day moving average. With some big trade issues sorted
out and the Fed being cautious about inflation, a price drop seemed pretty
likely. But then, a surprisingly weak jobs report came out and completely
flipped everything around.’
Indeed, trade-related risk premium may have started to leave the
market, but last Friday’s weaker-than-expected U.S. payrolls data boosted Fed
rate cut expectations, which, in turn, substantially weakened the U.S. dollar
and thus pulled XAUUSD higher. The short-term technical picture for gold now
looks bullish again.
Kar Yong Ang offers his perspective on the technicals: ‘In case XAUUSD rises above the critical
3,395 level and holds above it, traders will then almost certainly attempt to
pull it towards the 3,426 level, where short-term consolidation may begin to
take place again. However, a confident rise above 3,460 will open the way
towards new all-time highs. Alternatively, only a drop below 3,300 will
invalidate the underlying bullish trend’.
Octa broker offers a proprietary trading
platform to facilitate trading activities. Gold traders can expect fast
execution and small spreads and also benefit from the company’s dedicated
analytical support, which includes daily trading ideas and educational
materials.
XAUUSD DAILY TECHNICAL CHART
Key Macro Events in August
(scheduled)
Disclaimer: This article
does not contain or constitute investment advice or recommendations and does
not consider your investment objectives, financial situation, or needs. Any
actions taken based on this content are at your sole discretion and risk, and
we and Octa do not accept any liability for any resulting losses or
consequences.
About Octa
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that has been providing online trading services worldwide since 2011. It offers
commission-free access to financial markets and various services used by
clients from 180 countries who have opened more than 52 million trading
accounts. To help its clients reach their investment goals, Octa offers free
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The company is involved in a
comprehensive network of charitable and humanitarian initiatives, including
improving educational infrastructure and funding short-notice relief projects
to support local communities.
Since its foundation, Octa has won
more than 100 awards, including the ‘Most Reliable Broker Global 2024’ award
from Global Forex Awards and the ‘Best Mobile Trading Platform 2024’ award from
Global Brand Magazine.
This article was written by IL Contributors at investinglive.com.