extended its gains for a second consecutive session, buoyed by growing expectations of US interest rate cuts and sustained weakness in the . The precious metal, often viewed as a hedge against economic instability and currency depreciation, is once again in the spotlight as investors brace for monetary easing and rising fiscal concerns.
Rate-Cut Bets Fuel Safe-Haven Demand
The US Federal Reserve’s monetary policy path remains the dominant force shaping sentiment in precious metals. Market participants are increasingly pricing in a series of interest rate cuts in the second half of 2025, following a slew of mixed economic data and mounting fiscal pressure stemming from the proposed $3.3 trillion spending and tax cut package introduced by former President Trump.
With the US economy showing signs of slowing and inflation moderating, speculation is building that the Fed could adopt a more aggressive easing stance. Lower interest rates tend to benefit gold by reducing the opportunity cost of holding non-yielding assets. This dynamic has made gold particularly attractive to investors looking for stability amid growing concerns about the health of the US fiscal outlook.
The futures market is now pricing in at least three rate cuts by the end of 2025, a shift that has re-energized bullish sentiment in the gold market. Investors are positioning themselves accordingly, with inflows into gold-backed exchange-traded funds (ETFs) picking up momentum in recent weeks.
Dollar Weakness Enhances Gold’s Appeal
Further supporting the rally is sustained weakness in the US dollar, which has fallen to its lowest level since early 2022. The greenback has come under pressure as concerns mount over fiscal sustainability and political uncertainty surrounding the upcoming election cycle. A weaker dollar makes gold cheaper for international buyers, increasing demand across global markets.
In currency markets, the dollar has struggled to regain traction amid investor skepticism about the long-term impact of Trump’s fiscal stimulus plans. The combination of rising debt and potential loss of confidence in fiscal discipline is weighing on the dollar, and by extension, giving gold another tailwind.
As geopolitical tensions and policy uncertainty linger, the dollar’s decline is prompting investors to seek refuge in traditionally safer assets, reinforcing the bid for gold.
Technical Picture Shows Recovery from Demand Zone
On the technical front, gold () is showing signs of a short-term recovery after a pullback from the $3,380 level, which formed a bearish order block. The price found solid support in the $3,245–$3,265 demand zone, a region where large-volume buying re-entered the market.
From this base, gold has been gradually climbing, approaching the 200-day exponential moving average (EMA), a key level watched by technical traders. A successful break above the EMA could confirm a broader bullish reversal and open the door for further gains, especially if macroeconomic data continues to support the case for monetary easing.
Volume analysis indicates increased buying interest at the recent lows, with larger market participants—often referred to as “whales”—appearing to accumulate positions in anticipation of a longer-term uptrend. This accumulation behavior, combined with positive macro catalysts, is laying the groundwork for a potential breakout.
Broader Market Context: Risk and Opportunity
In the broader market, risk sentiment remains cautious. While equity markets have seen impressive gains in the second quarter, the undercurrent of uncertainty—ranging from fiscal policy to geopolitics—has led many investors to rotate some capital into safer assets like gold.
The proposed fiscal package in the US has sparked debate over its long-term implications, with critics warning it could trigger inflationary pressures down the road or further strain public finances. These worries are contributing to a heightened demand for inflation hedges, of which gold remains the most prominent.
Moreover, tensions in the global trade landscape, particularly between the US and Japan, are also on the radar. Any escalation could add to gold’s safe-haven appeal, especially if investors begin to reassess risk in other asset classes.
Outlook: Gold’s Path Forward
Looking ahead, gold’s direction will likely hinge on several key factors: the pace and size of expected Fed rate cuts, the trajectory of the US dollar, and incoming economic data. Should the Fed confirm dovish signals in the coming weeks, gold could see a renewed surge toward previous highs.
For now, the short-term outlook remains constructive. As long as the US dollar remains under pressure and rate-cut expectations solidify, gold is well-positioned to extend its recent gains. Investors will be closely watching Fed communication and fiscal developments in Washington for further clues.
In conclusion, gold continues to shine in a landscape marked by fiscal uncertainty, monetary policy shifts, and currency weakness. With the fundamentals aligned and technicals showing recovery, the yellow metal may remain a favored asset for cautious investors navigating an increasingly complex global economy.
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