Gold holds gains amid US fiscal outlook and trade policy fears

Yahoo

02-07-2025

Gold prices held steady in early European trading on Wednesday, consolidating gains from earlier in the week as concerns over the US fiscal outlook and trade policy underpinned demand for safe-haven assets.
Gold futures slipped 0.4% to $3,338.10 an ounce, while spot gold was just above the flatline at $3,329.43 per ounce.
Bullion has climbed more than 2% so far this week, rebounding from losses triggered by last week's Israel-Iran ceasefire, which had briefly eased geopolitical tensions.
The latest upward momentum came after the US Senate narrowly passed president Donald Trump's sweeping tax-and-spending package, legislation expected to add $3.3tn to the national debt. Fears over a widening fiscal deficit have reignited investor appetite for gold.
Read more: 'Too soon' to see price effects from tariffs, says Bank of England's Bailey
"We anticipate a wide and volatile trading range of $3,600–3,100/oz for the rest of the year and year-end prices of $3,175/oz for 2025 and $3,025/oz for 2026,' the bank said in a note. It raised its 2025 average price forecast to $3,215 an ounce, up from $3,015, and its 2026 outlook to $3,125 from $2,915.
Adding to market jitters is the fast-approaching July 9 deadline for Trump's proposed tariffs. The US president has reiterated there would be no extension, warning trading partners of pending tariff notifications, a move that has pushed investors to seek safe-havens.
Oil prices were little changed on Wednesday as traders balanced expectations of increased supply from major producers next month against a softer US dollar and mixed economic signals from the United States, the world's largest oil consumer.
Brent crude rose was just above the flatline at $67.16 a barrel, while the West Texas Intermediate hovered at $65.44 in early trading.
Weighing on the market were fresh inventory figures from the American Petroleum Institute, which showed US crude stockpiles rose by 680,000 barrels last week. The build surprised some traders, as inventories typically decline during the peak summer demand season.
"Today's oil price moves are being pushed by the interplay of potentially rising OPEC+ supply, confusing US inventory signals, uncertain geopolitical outlook, and macro-policy ambiguity," said Phillip Nova senior market analyst Priyanka Sachdeva.
While the Organisation of the Petroleum Exporting Countries and its allies, including Russia — known collectively as OPEC+ — are expected to raise output in the coming weeks, Sachdeva noted that such increases 'appear already priced in by investors and are unlikely to catch markets off-guard again imminently.'
The pound edged lower against the dollar on Wednesday morning, slipping 0.3% to $1.3712, as the greenback strengthened following an unexpected surge in US job openings.
The GBP/USD rally stalled after touching a three-and-a-half-year high around $1.3800 on Tuesday, with investors recalibrating positions in response to robust data from the US labour market.
Figures released on Tuesday showed that US employers posted 7.769 million job openings in May, up from 7.395 million in April and significantly above economists' expectations of 7.3 million. The data, part of the US Job Openings and Labor Turnover Survey (JOLTS), suggested continued strength in the US employment market.
The US Dollar Index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, rose 0.1% to 96.70.
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However, despite the dollar's near-term gains, analysts warned that broader pressure on the currency persists. The dollar has come under strain amid concerns over Trump's attacks on the Federal Reserve's independence, uncertainty surrounding the July 9 tariff deadline, and his proposed ''Big Beautiful Bill'.
Analysts at National Australia Bank (NAB) said: "The confirmation that Trump's bill is an increase in issuance, an increase in government spending well beyond its means, is not necessarily good news for the Treasury market, and it's arguably one of the reasons the US dollar's going down."
In other currency moves, the pound was muted against the euro, at €1.1640 at the time of writing.
In equities, the UK's FTSE 100 (^FTSE) was higher, up 0.2% to trade at 8,796 points.Sign in to access your portfolio