Spot gold rises above $3,440 per ounce, up 0.7% intraday.

Spot gold rises above $3,440 per ounce, up 0.7% intraday.

Spot gold prices surged above $3,440 per ounce on July 2, 2025, marking a 0.7% intraday gain. This significant increase was driven by heightened political uncertainty and monetary policy ambiguity, as President Donald Trump's firing of Federal Reserve Governor Lisa Cook and the Federal Reserve's potential rate cut in September have fueled investor concerns. The move by Trump, citing allegations of mortgage fraud, has raised questions about the central bank's independence, further exacerbating market volatility.

The Fed Chair Jerome Powell's comments last week hinted at a possible 25 basis points (bps) rate cut in September, highlighting growing risks to the labor market while noting that inflation remains a threat. Currently, markets are assigning an 83% probability of a 25bps rate cut next month. Investors are eagerly awaiting the release of the PCE price index on Friday for further insights into the trajectory of US monetary policy.

Gold's performance has been bolstered by a weakening U.S. dollar, which has eroded confidence in the dollar's hegemony. Central banks, including China and Poland, have accelerated their gold purchases in response to Trump's aggressive tariff policies. By mid-2025, central banks are estimated to have bought 710 tonnes of gold quarterly, with total purchases for the year projected at 900 tonnes [1]. This demand has reduced the dollar's share of global reserves to below 47%, the lowest since the 1970s [1].

Global gold ETF holdings have surged to 3,616 tonnes by mid-2025, with inflows totaling $3.2 billion in July alone. This shift reflects a broader reallocation of capital toward safe-haven assets, as gold has outperformed equities and U.S. Treasuries in 2025 [1]. The BlackRock Geopolitical Risk Indicator (BGRI) for July 2025 confirmed that geopolitical tensions are now entrenched at levels one standard deviation above historical averages [1].

Gold's price has increasingly correlated with equities and risk assets, challenging its traditional safe-haven role. However, the current environment, marked by a steepening U.S. Treasury yield curve and a loss of trust in U.S. debt, has reinforced gold's utility as a hedge against inflation and political risk [2]. The cost of holding non-yielding bullion has fallen, making it more attractive to investors seeking to preserve capital in a low-yield world [1].

For investors, the case for gold remains structurally sound. Central bank demand, geopolitical volatility, and dollar weakness create a multi-year bull case, supported by J.P. Morgan's forecast of gold reaching $4,000 per ounce by mid-2026 [1]. While short-term fluctuations may occur, the interplay of monetary policy uncertainty and global reserve reallocation ensures gold remains a critical component of diversified portfolios.

References:
[1] https://www.ainvest.com/news/gold-strategic-rally-hedging-opportunity-dollar-weakness-fed-uncertainty-2508/
[2] https://www.jpmorgan.com/insights/global-research/commodities/gold-prices