Source: Parth Sanghvi
Gold Prices Recover in Asian Trade Amid Weaker Dollar and Renewed Trade Optimism
Gold prices experienced a slight uptick in Asian trade on Monday, following a recovery from a one-month low. This rebound was largely due to a weaker U.S. dollar and renewed trade optimism, which helped boost investor sentiment. However, despite these positive factors, the safe-haven demand for gold remained limited, primarily due to signs of de-escalation in geopolitical tensions in the Middle East.
Gold Rebounds After Weekly Rout
Spot gold, which refers to the current market price for physical delivery of gold, rose 0.5% to $3,290.25 per ounce. Gold futures for August delivery also saw a gain, increasing 0.4% to $3,300.00 per ounce by 02:00 ET (06:00 GMT). These increases came after the yellow metal experienced a nearly 3% drop last week, marking its steepest weekly decline since early May. This drop was primarily due to markets unwinding safe-haven positions following a U.S.-brokered ceasefire between Israel and Iran.
Despite these gains, gold prices have remained flat for June, as geopolitical-driven gains early in the month were wiped out by selling pressure following the ceasefire.
Ceasefire Cools Risk Premium
The recent ceasefire deal between Israel and Iran, brokered by U.S. President Donald Trump, significantly reduced geopolitical uncertainty. This decrease in uncertainty has resulted in a muted safe-haven demand for gold, which is traditionally seen as a hedge during times of conflict. Before the ceasefire, tensions in the Middle East had driven gold prices to multi-week highs. However, signs of regional stabilization have led traders to shift back into risk assets such as equities and cryptocurrencies.
U.S. Trade Deals Add Tailwind to Sentiment
Gold prices also found indirect support from rising optimism around global trade agreements. A U.S.–China trade pact, signed last week in Geneva, resolved crucial disputes over rare-earth exports. Additionally, a U.S.–U.K. deal went into effect on Monday, eliminating duties on aircraft parts and trimming car tariffs to 10%. These agreements have instilled a sense of optimism in investors, indirectly supporting the gold market.
However, markets remain cautious ahead of the July 9 deadline, which could see the reinstatement of duties on other trade partners and potentially bring back global tariffs on steel and aluminum.
Weak Dollar Lifts Bullion
The rebound in gold prices was largely underpinned by a sliding U.S. dollar, which increases the appeal of dollar-denominated commodities for foreign investors. The U.S. Dollar Index (DXY) fell by 0.2% in Asian trade, hovering near a three-year low. Bets are also rising for a Federal Reserve rate cut by September, which could further weaken the dollar and boost gold prices.
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Final Word
With rate cut bets mounting, a weaker dollar in play, and geopolitical risks in flux, gold remains in a tight tug-of-war. While Monday’s gains offer some relief from last week’s slump, the next leg in price action will likely depend on the Fed’s July guidance, tariff developments, and trade diplomacy outcomes heading into mid-summer. Thus, investors should closely monitor these factors to better understand and predict gold’s future performance.