Gold and silver prices have fallen back this week due to a stronger US dollar. Solid GDP figures and a hawkish Federal Reserve have boosted the dollar to a two-month high.

The US dollar index is up 2.3% over the past five days as markets reacted to news of an EU-US trade deal, followed by a bigger than expected GDP reading. US GDP grew at a rate of 3% annualised in Q2, compared to a 0.5% contraction in Q1. The GDP figures have been impacted by a surge in imports ahead of tariffs, but still suggest a US economy that is holding up well to uncertainty.

The Federal Reserve kept US rates unchanged at last night’s FOMC meeting as expected. There is uncertainty however over when they will resume cutting rates. Odds for a September cut have dropped on CME FedWatch tool, with October or December seen as the more likely months for a cut.

Gold has struggled to hold onto support at $3,300 this morning as a result of the stronger dollar, trading above and below this level. In other currencies however, the currency fluctuations have evened out. In USD gold is down over 2% this week, while in GBP and euros it is up 0.21% and 0.68% respectively.

310725 USD Chart

Silver has also fallen from its recent highs, losing over 5% this week and pulling back to as low as $36.85 at its worst this morning. In GBP silver is back below £28 per ounce, down 3.35%. In Euros silver is down 2.79%, with the euro weaker versus the dollar following their trade deal still resulting in tariff rates of 15%.

The Fed have already faced criticism from President Trump for not cutting rates sooner, and did warn that the US economy was showing early signs of cooling, which could give them some room to cut. With the US economy and labour market holding up however, and a potential jump in prices when new tariff rates come into force tomorrow, it still looks unlikely that they will be rushing to cut rates.

August will now become a key month of data gathering for the Fed. They will be able to see if tariffs do cause a spike in inflation as expected, and what impact it has on US businesses. They will need to either absorb the additional costs, reducing profit, or try to pass on the cost to US consumers. If there is a quick and apparent impact on the US economy then a September cut could still be possible. A Q4 cut is the current expectation however, and when that happens the US dollar could begin to weaken once more, driving gold and silver higher.