Gold price today July 25: USD recovers, gold faces many risks

The world gold price faces many risks when facing a series of monetary policies of many central banks around the world.

Edward Moya, senior market analyst at OANDA, said that the gold market is reacting due to the rally in the USD. The Bank of Japan (BOJ) signaled that it would maintain its loose monetary policy.

In addition, the meeting of the US Federal Reserve (Fed) on July 26 will almost certainly announce an increase in interest rates by 25 percentage points. Thereby, the strength of the USD continues to increase, making gold less attractive.

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The precious metal experts said that the direction of gold in the near future largely depends on the statement of Fed Chairman Jerome Powell at the press conference.

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According to Moya, if the Fed continues to make the option of tightening further and the upcoming economic data is positive, it will likely cause gold to fall deeply.

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Chris Williamson, chief economist at S&P Global Market Intelligence, said that although inflation has fallen sharply from last year's 40-year high, it is likely to remain above 3% for the foreseeable future.

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In the foreign exchange market, the US Dollar Index (DXY) opened this morning at 101.42 points.

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The US received positive economic information. The Manufacturing Purchasing Managers' Index (PMI) increased from 46.3 points in June to 49 points in July, and higher than the forecast of only 46.1 points.

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PMI of manufacturing sector and service sector in Eurozone were respectively at 42.7 and 51.1 points in July, lower than June's 43.4 and 52 points, and lower than 43.5 and 51.7 points according to forecast.

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In a recent interview with Kitco News, Steven Land, Portfolio Manager of Franklin Templeton's Franklin Gold and Precious Metals Fund, said gold's lackluster position shows its potential in the market.

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Edward Moya, senior market analyst at OANDA, said that the gold market is reacting due to the recovery of the USD. The Bank of Japan (BOJ) signaled that it would maintain its loose monetary policy.

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Currently, there are three reasons given when countries look for another currency. First, US monetary policy influences the rest of the world too much. Second, the dollar is becoming too expensive for emerging countries, particularly for imports.

Third, the demand for oil is gradually diversifying. A major reason the USD has become the world's reserve currency is that the Gulf states of the Middle East used the greenback to trade oil.

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According to Kitco, gold prices are under pressure in the short term due to the Fed's interest rate hikes. However, in the long term, precious metals tend to increase thanks to the USD about to reverse its downward trend when the Fed ends the cycle of tightening monetary policy.

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After Wednesday's widely anticipated 25 basis point hike, there's about a 60 percent chance the Fed will keep rates unchanged through 2024, according to the CME FedWatch tool.

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Gold consumption by key buyers grew 16% year-on-year in the first half of 2023, with jewelry consumption up nearly 15%.

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According to Reuters, gold prices rose as the dollar and bond yields fell ahead of the Fed rate hike news and Chairman Jerome Powell's comments.

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Tim Waterer, head of market analysis at KCM Trade, said: “If Chairman Powell suggests that interest rates may have peaked, this would signal good news for prices. Gold has rallied in recent weeks.”