Gold prices held firm on Tuesday, hovering around $3,325 an ounce, after a significant 3% surge on Monday, fueled by a weakening US dollar and rising optimism surrounding potential US trade deals. Investors continued to favour gold as a safe-haven asset, especially amidst volatile currency markets and uncertainty tied to trade policies under the Trump administration.

Weak Dollar Strengthens Gold’s Appeal

A sharp decline in the US dollar has boosted global gold sentiment. The greenback weakened against a basket of major currencies, driven by speculation that the US could make concessions on exchange rates as part of upcoming trade agreements. This devaluation of the dollar makes gold cheaper for foreign investors, increasing global demand.

This trend significantly supports gold’s attractiveness as a hedge against economic and political instability, especially when confidence in US assets falters. The Bloomberg Dollar Spot Index, a key indicator of the dollar's strength, remained flat on Tuesday after falling 0.3% in the previous session.

Trump’s Trade Policy Drives Gold Momentum

President Donald Trump’s aggressive trade policies have often shaken markets, triggering a move away from US dollar-backed assets. Investors are increasingly allocating funds into gold, perceiving it as a safer alternative amid the trade war's ripple effects. Trump recently suggested new trade agreements could be finalised this week, which led to growing anticipation and speculation in global markets.

Moreover, Trump’s earlier stance of linking trade negotiations to currency valuations has furthered fears of possible dollar intervention, increasing the speculative drive behind bullion.

Gold’s Year-to-Date Performance Remains Strong

Despite some recent volatility, gold has gained more than 25% so far in 2025, hitting a record high above $3,500 an ounce in April. The surge has been fueled by:

• Safe-haven buying, especially during geopolitical or economic uncertainties

• Speculative demand, particularly in China, where gold is favoured for investment security

• Aggressive central bank purchases, as nations diversify reserves away from the dollar

This upward momentum has made gold one of the top-performing assets of the year.

Spot Gold, Silver and Other Precious Metals

At 8:29 a.m. in Singapore, spot gold was down 0.3% at $3,325.57 an ounce. Other precious metals showed mixed movement:

• Silver slightly edged higher

• Palladium and platinum remained largely unchanged

These movements indicate a consolidation phase after Monday’s strong rally.

All Eyes on the Federal Reserve's Decision

Markets are closely watching the Federal Reserve’s upcoming policy meeting, set to conclude on Wednesday. The general consensus is that interest rates will remain unchanged, despite President Trump intensifying pressure on Fed Chair Jerome Powell to lower borrowing costs.

Why is this important for gold?
Gold, being a non-yielding asset, tends to perform well in low interest rate environments. A pause or cut in rates reduces the opportunity cost of holding gold, making it more attractive for investors.

Speculative Activity and Central Bank Moves

Investor demand is not the only factor lifting gold. Speculative activity in Asia, especially China, continues to push prices upward. Retail and institutional buyers are showing renewed interest in gold ETFs and futures.

Meanwhile, central banks across emerging and developed markets are diversifying away from the dollar, with a focus on increasing their gold reserves. This global trend reinforces gold’s long-term strength.

Trade Deals Could Recalibrate Currency Dynamics

An important aspect that could impact gold further is the potential for currency clauses in US trade deals. The Trump administration is reportedly considering agreements that may involve adjusting currency valuations—which could further weaken the dollar and boost gold’s appeal.

A recalibrated dollar may disrupt global exchange rate stability and encourage other nations to respond with competitive devaluation, once again playing into gold’s safe-haven narrative.

Conclusion: Gold Remains Resilient Amid Trade and Currency Tensions

As markets await the next big move on both the monetary policy front and the geopolitical trade front, gold remains a resilient and preferred asset class for both retail and institutional investors.

Key takeaways:

• Gold remains near multi-month highs amid global currency volatility

• Weaker dollar makes gold attractive across global markets

• Upcoming US Fed rate decision and Trump’s trade announcements are key triggers to watch

Investors should monitor developments in US trade negotiations and the Federal Reserve’s policy stance closely, as these will heavily influence gold’s direction in the coming weeks.

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