On Wednesday, August 27th, the yellow metal slipped as the U.S. dollar and Treasury yields climbed, but don’t be fooled, safe-haven demand is still propping it up thanks to political and central bank drama in Washington.
At last check, spot gold dipped 0.4% to $3,379.76 an ounce, while U.S. gold futures for December edged slightly lower at $3,428. For context, that’s coming off a two-week high the metal touched on Tuesday after President Donald Trump tried, and failed (for now) to oust Federal Reserve Governor Lisa Cook.
Why is gold down?
Two words: dollar strength.
The U.S. dollar index climbed 0.4% against a basket of major currencies, making gold more expensive for overseas buyers. Add in a slight uptick in Treasury yields (up 0.4%), and you’ve got downward pressure on non-yielding assets like gold.
As Kitco Metals senior analyst Jim Wyckoff put it:
“Yields are putting selling pressure on the gold and silver markets.”
Politics meets gold
This isn’t just about charts and indicators. Trump’s move to fire Fed Governor Lisa Cook rattled markets, raising fears about the independence of the Federal Reserve. Cook’s legal team is now preparing a lawsuit to block her removal, setting the stage for a messy court battle.
Interestingly, that political drama actually boosted gold on Tuesday, pushing it to a two-week high, as investors sought the safety of precious metals amid uncertainty.
What will gold do next?
Markets aren’t just watching Washington; they’re laser-focused on economic data drops this week: U.S. GDP numbers on Thursday and Personal Consumption Expenditures (PCE) data on Friday.
Economists expect the PCE index to show a 2.6% rise in July, matching June. If inflation comes in hotter, traders may question whether the Fed will actually cut rates in September. But according to Wyckoff, it would take an “awfully strong inflation number” to derail those expectations.
And right now? The CME FedWatch Tool shows markets are pricing in a 90%+ chance of a 25-basis-point rate cut next month.
The bigger metals picture
Gold isn’t the only one under pressure. Other precious metals also slipped:
Silver is down 0.7% to $38.31/oz, Platinum is off 0.5% to $1,341.83/oz, and Palladium dropped 0.6% to $1,087.44/oz.
Gold may have eased today, but the real story is unfolding over the next 48 hours. Between political fireworks in the U.S. and critical inflation data, traders should brace for volatility.
Whether gold bounces back or slips further could depend on just how hot (or cool) Friday’s PCE numbers come in, and whether Trump’s war with the Fed shakes investor confidence even more.
For now, gold is reminding us why it remains the world’s go-to safe-haven: when politics and policy collide, investors always come running back to it.
