Gold market outlook – new highs and global bidding war on the cards as increasing US structural cracks put risk assets under pressure

Spot gold ended July at US$3,385/Oz and traded rangebound through most of the month. We are struck by gold’s ability to consolidate horizontally after making major new all-time highs in April.

Such all-time highs (which many people still think - wrongly in our view - this was) are usually reversed much more impulsively (chart 1).

Chart 1: Monthly logarithmic gold chart. 2001 – present.

Source: Schroders. EMD and Commodities.

A key question for the gold outlook, because it will impact the path of both Federal Reserve interest rates and domestic US deficits, is whether the US economy can really absorb the highest import tariffs since 1909-1910 (according to Fitch), as well as a stifling immigration crackdown, and not suffer any material economic consequences.

In late July, as the White House finished up trade deals implementing tariffs ranging from 10% (UK) to 41% (Syria), US labour market and an array of other data suggested the answer to the above question was a resounding “yes”.

Fast forward to the latest US payrolls data issued in early August and the picture has flipped. Headline job growth was quite weak versus consensus (73k vs 110k consensus with job losses clear in cyclical sectors like manufacturing and business services). More striking were net revisions. On a 3-month rolling basis these are now as weak as the early 1980s, 2008 and 2020 (charts 2 and 3).

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