Gold and its shiny cousins — platinum, palladium, and silver — are far outperforming the S&P 500 and even the Nasdaq this year, driven by a weaker dollar and high uncertainty amid geopolitical tensions, including endless wars and, of course, trade wars fueled by Trump's tariffs on the rest of the world.
In the case of platinum, it also helps that the metal has been in supply deficit for three consecutive years. This shortage is due to booming demand in China and the US, falling production in South Africa, sanctions restricting Russian exports, and growing needs from automakers and jewelers.
Will the rally continue?
That depends on the circumstances. In the case of gold prices, one of the key factors is geopolitics. Although some recent attempts have brought the conflicting parties in Eastern Europe and the Middle East to the negotiating table, there has been no significant progress. In addition, tensions with Iran could escalate this fall.
Conversely, if the risks of conflict diminish, even temporarily, we could see a correction in safe-haven assets. However, the tepid market response to Trump's recent calls for détente suggests that investors are not betting on a miraculous breakthrough. On the other hand, this can always change quickly.
As for the weakening of the US dollar, Trump's constant attacks on members of the Federal Reserve, including the recent dismissal of Lisa Cook and pressure on Jerome Powell, could continue to push down the DXY index. The growing national debt, which has already exceeded $37 trillion, also works against the US currency.
Finally, the recently passed "big, beautiful bill" could add another $3.4 trillion over the next decade. In this context, hopes for a significantly stronger dollar seem slim. In fact, if doubts about the United States' financial stability worsen, investors could demand a higher risk premium or exit the market altogether.
But what could weigh on metals?
If markets were to experience a panic sell-off, precious metals would not be immune. In times of extreme fear, investors often rush to liquidate everything, including safe havens. Similarly, a slowdown in global business activity could hurt demand for metals such as platinum and palladium, which depend heavily on industrial use.
Looking ahead, Friday's July PCE report will be this week's key event for precious metals. If the figures exceed expectations, as with the PPI, markets could weaken, the dollar could strengthen, and metals could correct lower. However, if the data simply meets expectations, gold and its peers could extend their gains.