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Informist, Thursday, Jul. 10, 2025

 

MUMBAI – Gold prices are likely to see further upside going ahead despite near-term headwinds, as factors such as widening US fiscal deficit and continued buying from the official sector, comprising central banks and government institutions, will support the yellow metal, according to a weekly report on precious metals by Metals Focus.

On the back of easing trade tensions as US President Donald Trump extended the deadline for country-specific tariffs, easing geopolitical tensions, and reduced fears of a global recession, there has been a pullback in gold prices, which were currently trading at just under $3,300 per ounce, down 5% from its mid-June high. But the extension of the US tariff deadline will prolong the uncertainty for global markets, particularly in industries heavily reliant on complex supply chains, thus limiting the losses in gold, the report said.

 

Metals Focus maintained a constructive outlook for gold prices over the remainder of this year due to demand from the official sector, where many regular buyers have maintained their purchases 2025-to-date. Meanwhile, US tariffs are expected to remain historically high for some time and the risk of stagnation is therefore likely to persist, the report said.

 

On the US fiscal front, no near-term developments are likely to restore confidence. President Trump's tax-and-spending bill is projected to widen the fiscal deficit, keeping bond supply concerns in focus. While the dollar's role as the primary reserve currency is not under immediate threat, longer-term concerns about its stability continue to support gold, it said. 

 

Moreover, historic highs in equity valuations reinforced the case for gold as a diversification vehicle. In addition, there is still risk of tensions emerging in West Asia again, which is likely to support gold prices, according to the weekly report. 

 

However, a recent recovery in US Treasury yields has weighed on gold, as investors scaled back expectations of Fed interest rate cuts by year-end, following a report showing a surprisingly resilient US labour market, according to Metals Focus.

 

Other headwinds that led to gold retreating included the US government's decision on Apr. 2 to exempt precious metals from reciprocal tariffs, when gold EFPs (exchange of futures for physical) collapsed. As a result, inventories have since begun to decline. Earlier in the year, US tariff concerns and a spike in gold EFPs triggered sizeable gold deliveries into Chicago Mercantile Exchange vaults, leading to tightness in the London market. 

 

Additionally, physical demand in key markets in Asia has remained relatively soft amid still-elevated prices. Jewellery demand has been negatively affected by weak economic conditions and the fact that many markets have already entered a seasonally slow period for retail jewellery sales. In terms of physical investments too, investor interest, which was remarkably resilient earlier this year, appears to have eased recently, as the recent price pullback has raised concerns about further risks to the downside, according to the report.  End

 

US$1 = INR 85.57

 

Reported by Taniva Singha Roy

Edited by Tanima Banerjee

 

 

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