Global financial markets witnessed a notable shift in risk pricing during the first week of July 2026, driven by emerging positive signals regarding progress in negotiations between the United States and Iran in Doha. This development contributed to a decline in oil prices and a reduction in the geopolitical risk premium associated with the Strait of Hormuz.
Despite easing geopolitical tensions, gold maintained its upward trajectory, reflecting a shift in market focus from geopolitical risks toward economic and financial risks linked to the U.S. economy.
Fundamental Drivers Supporting Gold
Why Did Gold Not Decline Despite Easing Tensions?
Gold’s continued strength is primarily attributed to three key factors:
- Weak U.S. employment data released by the payroll processing agency.
- Rising doubts about the sustainability of U.S. economic growth during the second half of 2026.
- Increased hedging demand from international financial institutions and central banks amid persistent concerns regarding the U.S. fiscal deficit.
Impact of U.S. Fiscal Policy
The U.S. government’s fiscal deficit remains at historically elevated levels compared with the average of the previous decade, prompting institutional investors to reassess long-term sovereign risk.
The most significant implications include:
- Increased need for new government debt issuance.
- Continued pressure on the U.S. Treasury yield curve.
- Enhanced attractiveness of assets that are not directly exposed to sovereign credit risk.
- Strengthening gold’s position as a long-term hedging instrument.
Financial Asset Correlation Analysis
Relationship Between Gold and Real Yields
The traditional relationship between gold and real yields remains intact:
- Higher real yields generally exert downward pressure on gold.
- Lower real yields provide strong support for gold prices.
During June 2026, gold faced significant selling pressure due to rising U.S. Treasury yields, recording its largest quarterly decline since 2013.
However, weaker-than-expected employment data prompted markets to reprice monetary policy expectations, contributing to:
- A temporary halt in the rise of yields.
- The return of investment flows into gold.
- Price stabilization above $4,100 per ounce.
Impact of the U.S. Dollar
The U.S. Dollar Index is trading near the 101-point level. Although this level does not indicate severe weakness in the U.S. currency, the recent decline has provided additional support for gold through:
- Lower purchasing costs for investors outside the United States.
- Improved attractiveness of the precious metal in international markets.
Performance of Major Currencies
Euro
- Benefited from the decline in the U.S. dollar.
- Improved demand for higher-risk European assets.
Japanese Yen
- Recorded notable gains.
- Supported by expectations of intervention by Japanese authorities in the foreign exchange market.
British Pound Sterling
- Benefited from U.S. dollar weakness.
- Improved investment inflows into pound-denominated assets.
Quantitative Comparison of Major Assets
| Asset | Current Trend | Primary Influencing Factor | Expected Impact |
|---|---|---|---|
| Gold | Bullish | Weak employment data and declining yields | Positive |
| Oil | Bearish | Reduced geopolitical risks | Negative |
| U.S. Dollar | Stable with a bearish bias | Repricing of monetary policy expectations | Negative for the currency |
| Long-Term U.S. Bonds | Relatively stable | Expectations of economic slowdown | Neutral |
| Euro | Bullish | Dollar weakness | Positive |
| Japanese Yen | Bullish | Expectations of official intervention | Positive |
| British Pound Sterling | Bullish | Dollar decline | Positive |
U.S. Monetary Policy
Federal Reserve Stance
As of the date of this analysis, there have been no decisive new statements from Jerome Powell indicating a significant change in the overall direction of monetary policy.
Market attention is currently focused on:
- The Non-Farm Payrolls report.
- Core inflation developments.
- Trends in real wages.
- Economic activity indicators during the third quarter.
Implications of Monetary Policy for Markets
Market pricing suggests a relative decline in expectations that elevated interest rates will remain in place for an extended period compared with prevailing expectations in mid-June.
This has been reflected in:
- Relative stability in long-term bond yields.
- A modest decline in the U.S. dollar.
- Renewed investment demand for gold.
Technical Analysis of Gold
Pivot Point, Support, and Resistance Levels
Based on current trading activity near $4,129.56 per ounce:
| Level | Price (USD) |
|---|---|
| Third Resistance | 4,260 |
| Second Resistance | 4,220 |
| First Resistance | 4,175 |
| Main Pivot Point | 4,120 |
| First Support | 4,075 |
| Second Support | 4,020 |
| Third Support | 3,950 |
Technical Outlook
- Trading above the main pivot point supports the continuation of the short-term bullish trend.
- A breakout above $4,175 could pave the way toward $4,220.
- A move above $4,220 may open the path to test $4,260.
- A break below $4,075 would strengthen the probability of a decline toward $4,020.
- Losing the $4,020 level could restore bearish momentum toward $3,950.
Future Scenarios
Bullish Scenario
Conditions
- Employment data comes in weaker than expected.
- U.S. yields decline.
- The U.S. dollar continues to weaken.
Expected Outcome
$4,200 – $4,300 per ounce
Neutral Scenario
Conditions
- Economic data remains mixed.
- The Federal Reserve maintains its current stance.
Expected Outcome
$4,000 – $4,200 per ounce
Bearish Scenario
Conditions
- U.S. Treasury yields rise above 4.7%.
- Employment and inflation data exceed expectations.
Expected Outcome
$3,900 – $4,000 per ounce
Neutral Critical Assessment
From an institutional analytical perspective, the gold market faces an important interpretative challenge during July 2026, as certain short-term fundamental indicators conflict with long-term strategic assumptions.
On one hand, several investment models support the continuation of institutional and central-bank demand for gold as a strategic hedge against financial and sovereign risks. On the other hand, some of these models rely on long-term assumptions that are difficult to verify immediately or measure directly.
Furthermore, several reports issued by international banking and investment institutions tend to treat central-bank purchases as a permanent structural driver of prices, while providing less detailed analysis regarding the possibility of demand reversal should real yields stabilize sustainably or U.S. fiscal conditions improve.
Consequently, confidence in long-term forecasts remains lower than confidence in directly measurable indicators such as:
- Real bond yields.
- U.S. dollar performance.
- Employment data.
- Core inflation rates.
Accordingly, monitoring these variables remains the most important factor in assessing the future direction of gold during the second half of 2026.