The United States experienced a decrease in personal consumption expenditures prices, dropping from 3.7% in the previous quarter to 2.1% in the second quarter. This data suggests a slower pace of consumption price increase compared to the earlier period.
The EUR/USD pair experienced a drop, breaking below 1.1500, following strong US economic data on gross domestic product (GDP) and employment. Similarly, GBP/USD fell to a two-month low below 1.3300, influenced by a robust US Dollar and other economic indicators.
Gold and Us Treasury Bond Yields
Gold’s price tested $3,300 as US Treasury bond yields increased, influenced by strong US economic data. The Federal Reserve is anticipated to maintain current interest rate settings, which have remained unchanged for five consecutive meetings after a reduction last December.
The Federal Reserve faces scrutiny over its delayed rate cuts despite ongoing tariff uncertainties and a resilient economy. Critics suggest potential oversight in the labour market’s condition, questioning the timing of rate adjustments amidst economic pressures.
With the US Dollar showing significant strength, we see a clear trend to follow in the coming weeks. The recent drop in EUR/USD below 1.1500 and GBP/USD below 1.3300 is backed by strong US GDP figures and the latest jobs report from early July 2025, which added over 210,000 jobs. We should consider buying call options on dollar-tracking ETFs or put options on the Euro to ride this momentum.
The Federal Reserve’s Current Stance
The Federal Reserve seems locked into its current stance, having held interest rates steady for five meetings since the cut last December 2024. The drop in personal consumption prices to 2.1% gives them little reason to act, putting them right near their target. We can see this in the Fed funds futures market, which is pricing in a greater than 90% chance of rates remaining unchanged through the next meeting, suggesting strategies that profit from low volatility could be wise.
Gold is facing serious pressure at the $3,300 level, and we believe it may have trouble climbing higher. The primary reason is the rise in US 10-year Treasury yields, which are currently holding firm around 4.5%, making interest-bearing government bonds a far more attractive safe haven than non-yielding gold. We should look at buying put options on gold futures, as this provides a direct way to profit if prices fall back from this high level.
Despite the calm surface, we must remain aware of underlying risks like the ongoing tariff disputes. Looking back at the market swings during the 2018-2019 trade conflicts reminds us how quickly sentiment can shift. With market volatility, as measured by the VIX index, currently sitting at a relatively low 14, now is a cheap time to buy some protection through out-of-the-money call options on the VIX.
