Spot gold breaks through the $3,400 mark as investors focus on trade negotiations

    Spot gold broke through $3,400 per ounce during Monday's U.S. trading session, marking its first time above that level since June 17 and surging nearly 1.5% intraday. The rally was fueled by weakening U.S. dollar and Treasury yields amid trade negotiation uncertainties. The U.S. has mandated that countries must reach an agreement by the August 1 deadline or face additional tariffs, heightening safe-haven demand.

    David Meger, head of metals trading at High Ridge Futures, stated: “The approaching August 1 tariff deadline has introduced a degree of uncertainty into the market, which certainly benefits gold.”

    Meger noted that rumors of an earlier-than-expected U.S. interest rate cut are intensifying, while speculation about Federal Reserve Chairman Powell's potential replacement and Fed restructuring has heightened market unease.

    EU diplomats revealed that the bloc is preparing broader countermeasures as prospects for an acceptable trade deal with Washington dim.

    The EU had anticipated reaching an agreement with the US to keep tariff levels manageable, but hopes now appear dashed following talks last week between EU Trade Commissioner Maroš Šefčovič and his US counterpart in Washington.

    The German government has hinted at potential support for the EU to deploy its so-called anti-coercion tool. This legal instrument allows the EU to counter economic bullying through a series of trade and investment restrictions, such as limiting U.S. companies' access to financial services markets and participation in EU public tenders.

    Meanwhile, the U.S. dollar index fell nearly 0.8%, making dollar-denominated gold cheaper for foreign currency buyers, while the benchmark 10-year U.S. Treasury yield dropped to its lowest level in over a week.

    Stephen Innes, partner at SPI Asset Management, noted that uncertainty surrounding trade negotiations is underpinning gold demand. “European geopolitical risks remain in focus after the EU lowered its price cap on Russian oil exports, sparking fresh concerns over global energy supplies and inflation,” he said.

    Innes added that political instability in Japan is also keeping markets cautious, as Prime Minister Shigeru Ishiba's weakened position could complicate Japan-U.S. trade talks. “Overall, trade tensions, political instability, and inflation concerns are driving investors toward gold as a defensive asset, and prices will continue to strengthen as the new week begins,” he said.

    Regarding interest rates, the CME FedWatch Tool indicates traders see about a 63% probability of a rate cut in September.

    U.S. Treasury Secretary Steven Mnuchin said Monday that the Federal Reserve as an institution needs to undergo a comprehensive review to assess whether it is operating successfully. Mnuchin declined to comment on reports that he advised President Trump not to fire Fed Chair Jerome Powell, stating that decision rests with the president.

    Other precious metals rose in tandem: spot silver gained 1.8% to $38.86 per ounce; platinum climbed 2.2% to $1,453.17 per ounce; and palladium surged 3.5% to $1,284.46 per ounce.