Major, post-peak-chaos breakout in the USDX

After Friday’s comprehensive analysis, today’s issue is going to be quite brief. The reason is that there is only one major development happening right now, and what’s happening in gold is rather erratic.

Gold futures spike amid market discrepancy

Starting with the latter, the gold futures market is up by 1.7% without any confirmation in other markets. Silver futures are down, while spot gold and spot silver are slightly down. The GLD and GDXJ ETFs are both down in today’s pre-market trading. GLD only slightly, and GDXJ is down by 0.9%.

So, at this point I see no reason for the anomaly in gold’s futures continuous contract to change anything regarding the outlook.

What does change something related to outlook is what we see in the USD Index.

Namely, the USD moved clearly higher today, and it moved back above its April low.

This is completely unsurprising as it’s perfectly in tune with the Peak Chaos theory and with the way USD behaved before the previous tariff deadline – and you know about both. Quoting:

Tariff deadline extension analysis

“The previous tariff deadline situation centered around June 1st, 2025, when Trump initially threatened to impose 50% tariffs on European Union imports. However, on May 25th, 2025 - just 6 days before the deadline - Trump agreed to postpone this deadline to July 9th following a phone call with EU Commission President Ursula von der Leyen. This represented a clear pattern of last-minute flexibility that markets began to anticipate.

The July deadlines presented a more complex scenario, with July 8th marking the expiration of a 90-day pause on "reciprocal tariffs" and July 9th being the extended EU deadline. Importantly, Trump signaled his flexibility much earlier this time. On June 27th, 2025 - about 11-12 days before the deadlines - he stated "No, we can do whatever we want" when asked if the July deadlines were set in stone, indicating they could be extended or shortened. This earlier communication of flexibility represents a key difference from the June pattern.

What makes this particularly relevant for USD Index analysis is that the dollar bottomed on July 1st, 2025 - precisely 7-8 days before the July deadlines. This timing wasn't coincidental. The market had learned from the June experience that Trump tends to provide flexibility around tariff deadlines, and the July 1st USD bottom occurred right after his June 27th comments about deadline flexibility. Markets essentially front-ran the expected postponement.

Looking at the current August 1st deadline, we can draw several important lessons. If the historical pattern holds, we might expect some form of communication about deadline flexibility approximately 6-12 days before August 1st - which would place it around July 20th-26th, 2025. Given that it’s [July 23], we're likely in the middle of this expected communication window.

However, there's a crucial difference this time. The USD Index has already demonstrated significant strength since its July 1st bottom, breaking above key resistance levels and showing what appears to be a confirmed uptrend reversal. Unlike the previous situations where tariff uncertainty created dollar weakness, the market now seems to be pricing in that tariffs are fundamentally bullish for the USD. This suggests that even if August deadlines are postponed, the USD Index may not revisit the July 1st lows, as the fundamental narrative has shifted from "tariff chaos equals dollar weakness" to "tariff implementation equals dollar strength."

The pattern suggests that while we might see some near-term USD volatility around potential August deadline communications, any weakness would likely be limited and short-lived compared to the previous cycles, as markets have now embraced the longer-term bullish implications of the tariff policy for dollar strength. That’s exactly what the confirmed breakout indicates on the technical front.

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