Gold prices hovered close to a two-week high on Tuesday, supported by a softer US dollar and growing investor concerns about the fiscal outlook of the United States. This environment has made gold more attractive as a safe-haven asset, especially with the US government’s expanding budget deficit and uncertainty around future interest rate movements.

Spot gold remained steady around $3,339.99 per ounce, showing little movement early in the trading session. This stability comes after markets in both the US and London were closed on Monday for a holiday, limiting trading activity. Meanwhile, US gold futures experienced a slight dip of 0.8% to $3,339.80.

Factors Driving Gold Prices

Kelvin Wong, senior market analyst at OANDA for Asia Pacific, explained that the gold market is currently in a phase of consolidation, waiting for fresh catalysts that might push prices higher or lower. One of the major factors behind the recent strength of gold is the widening US budget deficit, which reached alarming levels after the passage of a tax-cut bill estimated to add about $3.8 trillion to the national debt over the next decade. This fiscal concern is weakening the US dollar, making gold cheaper and more appealing to investors holding other currencies.

The dollar index, which measures the greenback’s strength against a basket of other currencies, slipped by 0.3% to hover near its lowest level in a month. A weaker dollar tends to increase demand for gold since it lowers the price for holders of other currencies.

US Political and Economic Context

In parallel with gold market movements, US President Donald Trump eased off threats to impose 50% tariffs on imports from the European Union, choosing instead to allow more time for trade negotiations. This development calmed some geopolitical tensions that could have affected commodity prices.

Looking ahead, investors are focused on key US economic data releases and speeches from Federal Reserve officials scheduled throughout the week. The upcoming core Personal Consumption Expenditures (PCE) price index report will provide important insights into inflation trends and the likely path of US interest rates. Current market expectations suggest the Federal Reserve may resume cutting rates in September if economic conditions warrant.

Performance of Other Precious Metals

Besides gold, other precious metals showed mixed movements. Spot silver inched up by 0.1% to $33.38 per ounce, while platinum held steady at $1,084.28. Palladium, however, eased by 0.3% to $984.25 amid the cautious market mood.

This phase of price consolidation in gold amid ongoing economic and political uncertainties highlights the complex interplay between currency movements, fiscal policy, and investor sentiment. The US fiscal outlook and Federal Reserve actions will continue to be critical factors influencing gold and other precious metals markets in the near term.

The Upcoming IPOs in this week and coming weeks are 3B Films, N R Vandana Tex Industries, Scoda Tubes,Neptune Petrochemicals, Victory Electric Vehicles International, Wagons Learning.

The Current active IPO are Blue Water Logistics, Astonea Labs, Nikita Papers, Prostarm Info Systems, Aegis Vopak Terminals, Schloss Bangalore.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.