Broad investor optimism and a one-month delay in US import tariffs are keeping gold prices around $3,300 an ounce.
Although shifting investor sentiment could continue to weigh on gold, Metals Focus expects prices to remain well supported through the rest of the year, Kitco.com said in a report.
Resilient gold prices
Metals Focus, a commodity analysis firm, anticipates limited downside for gold in the latter half of the year.
Their latest note indicated that ongoing economic uncertainty is expected to bolster investment demand for the precious metal.
“Although the global economy appears to have avoided a full-scale trade war, US tariffs are expected to remain historically high for some time,” analysts at Metals Focus were quoted as saying in the report.
“Perhaps more significantly, while the US economy has remained resilient thus far, the inflationary impact of tariffs may take several months to fully resonate with consumers.
The risk of stagnation is therefore likely to persist.”
At the time of writing, the price of gold on COMEX was at $3,345.92 per ounce, up 0.7% from the previous close.
Concerns regarding unsustainable global debt are expected to underpin gold’s long-term upward trend, according to the British precious metals research firm.
US debt concerns
Investors are particularly monitoring the escalating US government debt, which has now exceeded $37 trillion.
New budget legislation is projected to add nearly $4 trillion to the deficit over the next decade.
This has fueled concerns about the scale of the US government’s debt, leading to elevated long-term bond yields and pushing the dollar to multi-year lows, Kitco.com said.
“President Trump’s tax-and-spending bill is projected to widen the deficit, keeping bond supply concerns in focus. Investor confidence in the independence of the US central bank will also remain a key issue,” Metals Focus said.
While the dollar’s role as the primary reserve currency is not under immediate threat, longer-term concerns about its stability continue to support gold.
As the second half of the year unfolds, the outlook for gold remains a subject of intense debate among analysts.
Market sentiments and bullish positioning
A prevailing sentiment suggests that the precious metal could face headwinds, primarily due to the “overcrowded” nature of bullish positioning.
This implies that a significant number of investors have already placed long bets on gold, potentially leaving limited room for further upward movement and increasing the risk of a correction should market sentiment shift.
However, a more nuanced perspective is offered by Metals Focus.
The research firm indicated that the intense bullish positioning observed earlier has shown signs of easing in July.
This development could be a crucial factor in mitigating some of the concerns about an overextended market.
A reduction in speculative long positions might suggest that the market is recalibrating, potentially creating a more sustainable foundation for gold prices going forward, or at least reducing the immediate pressure for a sharp correction.
“At the start of July, net managed money long positions in CME futures returned to levels last seen in April, though they remain well below the highs recorded earlier in the year,” the analysts said.
Similarly, after modest outflows in May, gold exchange-traded products (ETPs) saw renewed inflows in June, with global holdings by the end of June rising to their highest level since August 2022.
Measured in US dollar terms, gold ETPs reached a new all-time high end-month value of $383 billion.
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