Gold's Ascent: Navigating Economic Shifts, Fed Signals, and Geopolitical Undercurrents

Gold's upward price momentum might stabilize over the coming quarters, following an intense rally over the past 18 months, according to strategists at State Street Investment Management. Nevertheless, supportive elements such as inflows into exchange-traded funds, sustained central bank acquisitions, and a depreciating U.S. dollar are expected to maintain a bullish outlook for the precious metal into 2026. Strategists assign a strong probability of 80% for gold prices to remain flat or increase over the next 6-9 months, with a potential to reach $4,000 per ounce in their optimistic scenario. A weakening U.S. dollar trend, coupled with a potential dovish shift by the Federal Reserve in the second half of the year, could attract increased allocation to gold from the substantial funds currently in money market mutual funds. Spot gold is currently trading around $3,360 per ounce.

Comex gold futures are positioned to climb above their 20-day simple moving average, indicating robust upward momentum. If prices surpass this level, the rally could extend toward a resistance point of $3,450 per ounce, with the 50-day simple moving average now likely serving as a downside support. Gold saw a slight dip in early Asian trading due to optimism surrounding new trade agreements, which could diminish the metal's safe-haven appeal.  goods enter Vietnam duty-free, while U.S. tariffs on Vietnamese goods will be reduced to 20% from a previous 46%. This deal is viewed as a signal for more trade agreements to come, potentially easing trade tensions as a July 9 deadline approaches.

Gold prices remained largely unchanged on Thursday, as investors adopted a cautious stance ahead of the release of U.S. payroll data, which is expected to offer insights into the Federal Reserve's monetary policy direction. Spot gold held steady at $3,357.96 per ounce, while U.S. gold futures saw a slight increase of 0.2% to $3,369.10. Gold appears to be consolidating within the $3,320 to $3,360 range, with markets adopting a wait-and-see approach. Recent data from ADP indicated that U.S. private sector payrolls unexpectedly decreased by 33,000 jobs in June, marking the first decline in over two years, reflecting economic uncertainty impacting hiring. The broader non-farm payrolls report, due Thursday, is projected to show an addition of 110,000 jobs in June, a decrease from 139,000 in May.

Analysts suggest the Vietnam trade deal has likely already been factored into the market, with the primary focus now on the status of other trade agreements with major economies. While President Trump has not indicated an extension of the negotiation deadline for higher tariffs, despite stalled discussions with Japan, he has expressed optimism regarding a deal with India. Non-yielding gold typically performs well during periods of economic uncertainty and in low-interest-rate environments.

Leading experts, including Ben McMillan of IDX Advisors, assert that gold reaching $4,000 per ounce is "inevitable," driven by a structural shift in gold demand from central banks globally. Since 2020, central banks, particularly from China and India, have effectively doubled their annual gold purchases, seeking to diversify their reserves away from the U.S. dollar. This trend aligns with concerns over unsustainable U.S. debt levels.

Gold eased after a three-day gain as investors awaited crucial U.S. jobs data that could influence the Federal Reserve’s monetary easing path. Bullion traded near $3,345 an ounce. A pronounced deterioration in the labor market could pressure Fed officials to cut interest rates sooner, which typically benefits gold as it does not yield interest. Gold has seen an increase of more than one-quarter this year, trading approximately $150 shy of its record high set in April. The metal has been bolstered by demand for safe havens amid heightened geopolitical and trade tensions, along with robust central bank purchases and inflows into bullion-backed exchange-traded funds. Concerns over the U.S. deficit also persist, with President Donald Trump’s comprehensive tax and spending bill expected to add an estimated $3.4 trillion to the national debt over a decade, which could further boost gold's safe-haven appeal if approved. Investors continue to monitor U.S. trade negotiations as Trump's July 9 tariff deadline approaches, with signs that the market is becoming less apprehensive about his unpredictable stance on levies, given the current economic resilience. Spot gold was down 0.4% to $3,345.86 per ounce.