Gold soars on safe-haven demand amid trade uncertainty, weak dollar

Vijay Valecha, July 1, 2025, Khaleej Times

Gold prices surged this week as heightened investor anxiety over stalled US trade negotiations, a weakening dollar, and expectations of lower interest rates drove strong safe-haven demand.

Spot gold rose by 0.8 per cent to $3,328.71 an ounce on Tuesday, while gold futures for August delivery climbed 1 per cent to $3,339.70. This follows a 1.5 per cent gain on Monday, nearly offsetting losses from the previous week, which had been triggered by a short-lived ceasefire between Israel and Iran.

The rally in gold prices is being driven by several macroeconomic factors, most notably concerns over the upcoming July 9 deadline set by President Donald Trump for concluding trade deals with several key nations. Investors are bracing for the possibility of steep reciprocal tariffs — up to 50 per cent — if agreements are not secured with countries including Japan.

In the UAE, rising global prices are already being reflected in local bullion rates. As of Tuesday, 24-carat gold was priced at Dh400.25 per gram, while 22-carat stood at Dh370.75, 21-carat at Dh355.50, and 18-carat at Dh304.75. The increase has arrived at a time when footfall at Dubai’s Gold Souk and other jewellery outlets had just begun recovering, aided by the Summer Surprises 2025 shopping festival.

However, jewellers warn that consumer enthusiasm may taper off if prices continue to hold above Dh370 per gram — a level historically associated with reduced demand among price-sensitive shoppers. “Many customers had locked in prices around Dh365.75, and their strategy seems to be paying off,” said a leading Dubai-based retailer. “We’re seeing an uptick in forward bookings, but if prices remain elevated, retail volumes may cool.”

To stimulate buying, retailers are leaning on promotional campaigns. The Dubai Summer Surprises raffle has revised its threshold down to Dh1,000 from Dh1,500 for eligibility, in a bid to cushion the impact of rising prices.

Bullion market experts said with the global macroeconomic environment in flux, gold is once again positioning itself as a safe-haven refuge — a role it has played for centuries — particularly as inflation fears, trade turbulence, and fiscal uncertainty keep investors on edge.

Vijay Valecha, chief investment officer at Century Financial, said the rebound reflects investors’ flight to safety amid rising macroeconomic uncertainty. “Despite recent profit-taking, gold has rebounded strongly after bouncing off a key long-term bullish trendline,” he said. “The weakening US dollar, coupled with renewed fears about the government’s fiscal deficit and legislative wrangling over a massive tax and spending bill, has only added to gold’s appeal.”

Valecha added that further support could come from anticipated interest rate cuts by the Federal Reserve. “If the Fed signals dovishness in upcoming meetings, gold is likely to attract even more investor attention,” he said.

Market focus now turns to key economic indicators this week, including Thursday’s US non-farm payrolls report and purchasing managers’ index (PMI) data from S&P Global and the Institute for Supply Management. These releases could offer clearer direction on the Fed’s policy stance, influencing both Treasury yields and gold’s trajectory.

From a technical standpoint, analysts say gold has breached a descending channel resistance on the 4-hour chart, with upward momentum possibly pushing prices toward $3,350 — the upper boundary of the Bollinger Band and the 100-day simple moving average. A breakout beyond this level could set the stage for a test of the $3,377 mark, a previous support level from mid-May. On the downside, $3,300 and $3,275 remain key support levels.

Globally, gold’s appeal is further underpinned by investor expectations of continued dollar weakness. The US Dollar Index remained near three-year lows during Asian trading hours, making dollar-denominated gold more attractive to holders of other currencies. Lower US Treasury yields are also playing a role, reducing the opportunity cost of holding non-yielding bullion.

Despite the absence of new geopolitical flare-ups, gold’s upward momentum has been steady, supported by broader concerns over global fiscal health and trade volatility. Analysts at Commerzbank and HSBC believe gold will remain within a range of $3,100 to $3,500 through the third quarter, with fiscal policies, currency movements, and global growth indicators determining its next move.

In parallel, silver futures rose 0.4 per cent to $36.00 an ounce, while platinum futures slipped 0.4 per cent to $1,360.45. Industrial metals also saw mixed movement — copper futures on the London Metal Exchange rose 0.2 per cent to $9,839.95 a ton, and US copper futures jumped 1.2 per cent to $5.1145 a pound, buoyed by stronger-than-expected growth in China’s Caixin manufacturing PMI for June.

Precious metals analysts at Metals Focus note that strong central bank buying and persistent inflation concerns could also lend longer-term support to gold. “Central banks are not only diversifying away from the US dollar but also hedging against systemic risks. This sustained demand creates a floor for prices even in times of calm,” a recent report from the consultancy noted.

Source:

Khaleej Times