Gold could test US$4,000 an ounce amid fiscal fears, escalating trade tensions: market watchers
[SINGAPORE] While gold has cemented itself above US$3,000 an ounce in 2025 amid trade uncertainty and US fiscal fears, a bullish forecast could see US$4,000 an ounce within a year's time, said market watchers.
In Asian trading on Friday (Jun 6), spot gold was trading around US$3,371 an ounce as at 12.19 pm, up 29 per cent year to date.
As the US' debt-to-GDP ratio has exceeded 120 per cent, a level unseen since World War II, investors are seeking a safe haven asset alternative to the greenback, noted Bank of Singapore's currency strategist Sim Moh Siong.
He highlighted that the past glory of the US dollar as a safe currency has been eroded by the fiscal concerns, which will likely drive further decline in the greenback beyond the next six months.
This is especially given the absence of any signal from Washington to address the fiscal deficit concern, on top of a sweeping budget bill that has now been presented to the US Senate.
'That 'big, beautiful bill' points to large fiscal deficits… that could continue to fuel concerns about fiscal sustainability, to the detriment of the US dollar,' said Sim, adding that gold's projection is tied to the US dollar's value in a historically inverse relationship.
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Since last month, all three major credit ratings agencies have downgraded the US debt, which will pressure US dollar's value if foreign capital begins to question the reliability of US fiscal governance, wrote State Street Global Advisors in its gold mid-year outlook report released on Wednesday.
'The potential for trade wars has exacerbated these concerns,' the asset manager noted, adding that gold has stood out as a resilient store of value because it has no liability, does not depend on repayment, and does not require yield to justify its role in a portfolio.
The asset manager added that the gold prices could test US$4,000 an ounce to US$5,000 an ounce over the next 12-24 months, while trading above US$3,000 an ounce for the rest of 2025.
Uncertainty in the first half-year
The early days of the US President Donal Trump administration in 2025 have corresponded with heightened US economic uncertainty, consumer anxiety and a weaker US dollar – which created a tailwind for gold, highlighted State Street Global Advisors.
While gold prices have been climbing consistently, the market also experienced several dips during times of trade tension de-escalation and easing recession concerns, noted Bank of Singapore's Sim. These included a retreat from the all-time high US$3,500 an ounce in April.
On the other hand, a worsening tariff situation would fuel the gold rush even more, pushing gold prices to touch US$4,000 within 2025, he added.
This is despite a low likelihood after an amicable call between US President Trump and Chinese President Xi Jinping overnight that calmed investors' nerves.
Firm gold prices in the second half-year
Joshua Rotbart, managing director of Singapore-based bullion house J Rotbart & Co, expects gold to break its all-time high in the coming weeks, given the current geopolitical and fiscal uncertainties.
'However, we expect the pace of price appreciation to moderate, forecasting a 35 per cent year-over-year increase,' he noted. Such an increase represents a price trading around US$3,526 an ounce in 2025.
State Street Global Advisors has increased the probability of a base case to 50 per cent, with gold to trade between US$3,100 and US$3,500 an ounce in 2025, on lingering risk sentiments on the back of greenback weakness and policy uncertainty, despite loosened tariffs.
Bank of Singapore's Sim noted the bank's unchanged forecast on gold – which is to trade at US$3,500 per ounce in the coming six-month period and at US$3,900 within the next 12 months.
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