Gold Rises on Persistent Safe-Haven Demand
Gold prices () rose by 1.07% for the second consecutive trading session.
A weaker helped limit gold’s downside as fiscal concerns and trade uncertainties continued to weigh on the greenback. The Senate’s passage of President Trump’s extensive tax-and-spending bill, projected to add $3.3 trillion to the national debt, has fueled concerns about long-term US fiscal sustainability, supporting demand for commodities priced in dollars. Simultaneously, Trump’s frustration with US-Japan trade negotiations, alongside threats of a 35% tariff on Japanese imports, added another layer of uncertainty, preventing a steeper decline in gold prices.
On the monetary policy front, markets remain focused on the Federal Reserve’s (Fed) trajectory, which could significantly influence gold’s near-term direction. Fed Chair Jerome Powell signalled a patient stance on rate cuts but didn’t rule out the possibility of a reduction as early as this month. Meanwhile, US Treasury Secretary Scott Bessent indicated expectations for rate cuts by September. This monetary policy outlook and persistent fiscal and trade risks continue to create a supportive floor for gold even as geopolitical tensions temporarily ease.
Gold remained unchanged during the Asian and early European trading sessions. The consolidation followed comments from President Trump confirming that Israel had agreed to a 60-day ceasefire in Gaza, urging Hamas to accept the terms to prevent further escalation. This alleviated immediate concerns over a broader regional conflict and prompted some profit-taking in the gold market.
Euro Strengthens Following Dovish Fed Signals
The euro () gained 0.16% against the US dollar (USD) on Monday
The euro approached its highest level against the US dollar since September 2021 and its lowest point against the since January 2015. At the European Central Bank’s (ECB) annual conference, Federal Reserve (Fed) Chair Jerome Powell reiterated a cautious approach to further interest rate cuts, while acknowledging that a reduction could occur this month depending on incoming economic data. This stance has reinforced expectations that the Fed is open to easing policy if growth indicators weaken further.
US President Donald Trump’s persistent criticism of Powell has raised concerns about the independence of the Fed. Earlier in the week, Trump reportedly sent Powell a list of global central bank interest rates, annotated with handwritten notes suggesting the US rate should be between Japan’s 0.5% and Denmark’s 1.75%, telling the Fed Chair he was ’as usual, too late’. This tension, combined with a cautious Fed stance and looming fiscal risks, is pressuring the US dollar and supporting the euro in the near term.
EUR/USD fell slightly during the Asian and early European trading sessions. Today, traders should pay attention to ECB President Christine Lagarde’s speech at 1:30 p.m. UTC. Her remarks, particularly regarding the current economic outlook and potential policy adjustments, might offer clues about the central bank’s upcoming decisions. Additionally, the US Employment report is set to release at 12:15 p.m. UTC. Stronger-than-expected figures could provoke a downward correction in EUR/USD. Otherwise, the pair may rise towards 1.17500.
Weakening US Dollar Supports AUD
The Australian dollar () reached 0.65900 on Tuesday, following weaker-than-expected domestic data.
figures from the Australian Bureau of Statistics showed a modest 0.2% increase in May, below the expected 0.4% rise, signalling subdued consumer demand despite a slight improvement on April’s reading. Building permits also came in below expectations, reinforcing concerns about a slowing economy. These disappointing data have reinforced market expectations that the Reserve Bank of Australia (RBA) will cut by 25 basis points towards 3.6%, with traders pricing in further easing in the second half of the year. Market forecasts suggest the cash rate could fall towards 3.1% or 2.85%, which would be viewed as supportive of economic activity amid a softening domestic environment.
Despite the disappointing data, the Australian dollar found near-term support from a weakening US dollar, which remains under pressure near multi-year lows. The greenback’s weakness reflects rising market expectations of Federal Reserve rate cuts and uncertainty surrounding US President Donald Trump’s proposed spending bill. These factors have limited AUD’s downside, even as domestic data points to potential headwinds.
AUD/USD fell during Asian and early European trading hours. Today, the main focus is on the US ADP Employment report at 12:15 p.m. UTC. A stronger-than-expected figure may pressure AUD/USD, while weaker data could offer support.