Gold eased on Tuesday after hitting the upper line of the bullish channel, near the highest level since May 14, as the price dropped below the EMA (9) on the four-hour chart. The yellow metal is currently trading below the daily pivot point depicted at $4,642, where a break below the first daily support of $4,603 could trigger further decline towards the second level of $4,556. On the upside, if the price rises above the pivot point, it may surge towards resistance levels of $4,689 then $4,728.
Global financial markets are closely monitoring a series of developments that could influence investor sentiment and the outlook for major asset classes. The Dollar Index has rebounded from a multi-month low as investors assess geopolitical risks and shifting expectations for U.S. monetary policy. Meanwhile, Iran has vowed to retaliate as the United States expands sanctions, raising concerns over further regional escalation and its potential impact on energy markets. At the same time, investors are awaiting the U.S. Personal Consumption Expenditures (PCE) report due Wednesday, with the inflation data expected to provide important clues about the Federal Reserve’s next interest-rate decision and the future direction of the dollar, gold, and global markets.
Market Watch
Dollar Index Rebounds from Multi-Month Low
The U.S. Dollar Index rose during trading on Tuesday, rebounding from its lowest levels in several months as demand for the greenback increased amid geopolitical developments and investors awaited further signals regarding U.S. monetary policy.
The Dollar Index, which measures the U.S. currency’s performance against a basket of six major currencies, rose by around 0.1% to 99.07, extending its recovery from the low levels recorded in recent days.
The dollar found support as markets assessed the implications of the United States’ tightening measures and sanctions related to Iran, which boosted demand for the currency as a safe-haven asset. Investors also continued to monitor geopolitical developments and their potential impact on capital flows and global financial markets.
Meanwhile, the euro and the British pound came under some pressure against the U.S. currency, while the Japanese yen also declined, coinciding with the modest rise in the Dollar Index.
The dollar had faced significant pressure in recent days, falling to levels considered among its lowest in around three months, amid concerns over the U.S. Treasury’s plans to expand long-term bond buybacks and the potential implications for Treasury yields and the value of the U.S. currency.
Looking ahead, markets will closely watch for clearer signals regarding the Federal Reserve’s monetary policy outlook, particularly as uncertainty persists over the future path of interest rates, inflation, and Treasury yields. These factors are expected to remain key drivers of the dollar’s performance in the coming days.
Iran Vows Retaliation as the United States Expands Sanctions
Iran has vowed to retaliate against the United States following Washington’s announcement of expanded economic sanctions, a move aimed at increasing pressure on the Iranian economy and limiting its sources of revenue and international trade and financial relations.
U.S. Treasury Secretary Scott Bessent announced a new package of measures targeting economic and commercial networks linked to Iran, warning countries and companies that continue to conduct business with Tehran that they could face actions restricting their access to the dollar-based financial system. The new sanctions also targeted dozens of individuals, entities, and vessels.
The U.S. Treasury Department stated that the measures target several sectors used by Iran to support its economy and circumvent previous restrictions, including digital assets, technology, gold, aviation, and shipping, as part of a broader campaign to further isolate Tehran economically.
In response, Tehran affirmed its readiness to confront the new pressure and vowed to retaliate against the U.S. sanctions, while expressing confidence that some of its key trading partners would resist U.S. pressure. Iranian officials also warned that any further escalation could have consequences, stressing that Iran’s options for responding remain open.
These developments come amid continued tensions in the region, with reports indicating that Iran has signaled the possibility of taking economic or military measures in response to any further escalation, including actions that could affect oil exports and shipping routes through the Gulf region.
The new sanctions and Iran’s potential response are expected to remain closely watched by global markets in the coming period, particularly amid concerns over the potential impact of further escalation on energy supplies and maritime navigation in the Gulf.
Markets Await U.S. Personal Consumption Expenditures Report Due Wednesday
Global markets are awaiting the release of the U.S. personal income and spending report for July, which includes the Personal Consumption Expenditures (PCE) Price Index, on Wednesday. The report is being closely watched by investors as it is one of the key indicators used by the Federal Reserve to assess inflation trends and determine the future course of monetary policy.
The U.S. Bureau of Economic Analysis (BEA) is scheduled to release the report at 8:30 a.m. Eastern Time on Wednesday, August 26, alongside the second estimate of U.S. gross domestic product (GDP) for the second quarter of the year.
The PCE Price Index receives significant attention as the Federal Reserve’s preferred measure of inflation, providing a broad view of price trends and consumer spending. July’s data could play an important role in shaping market expectations for the U.S. central bank’s next policy move, particularly as inflation remains above the Federal Reserve’s 2% target.
Markets are particularly focused on the core PCE price index, which excludes food and energy prices and is considered a key measure of underlying inflationary pressures. The data are especially important ahead of the Federal Reserve’s September meeting, as the results could directly influence expectations for interest rates.
A higher-than-expected inflation reading could strengthen expectations that the Federal Reserve will maintain a restrictive monetary policy for longer, potentially supporting the U.S. dollar and Treasury yields. Conversely, weaker-than-expected inflation could reinforce expectations of monetary policy easing, potentially supporting equities and gold while putting pressure on the dollar.
The report comes during a busy week for U.S. economic indicators, making the PCE data one of the key potential market drivers as investors continue to assess inflation developments, economic growth prospects, and the outlook for interest rates in the months ahead.