Gold Surges Above $3,400 As Rate Cut Bets And Tariff Fears Stoke Demand

Gold surged to its highest point in over a month during the early Asian session, as the U.S. dollar weakened and Treasury yields dipped. Spot gold climbed to $3,402.86 per ounce, as the market braces for the incoming tariff deadline.

"With the August 1st deadline looming, it brings a level of uncertainty to the market, and that certainly is supportive," David Meger, director of metals trading at High Ridge Futures, said per Reuters' report.

Meanwhile, expectations for interest rate cut remain elevated. On Friday, Federal Reserve Governor Christopher Waller called for a rate cut as early as this month, reinforcing markets' dovish bias.

Traders are currently pricing in a 63% chance of a cut in September. Political pressure for looser monetary policy, combined with heightened geopolitical risk, continues to put downward pressure on the dollar, thereby strengthening the case for gold.

While financial institutions differ in their views, the overall sentiment for the yellow metal is bullish. CIBC Capital Markets analyst Anita Soni predicts that gold will average $3,600 in the second half of 2025, driven by "a banquet of uncertainty."

JP Morgan Research expects gold to reach $3,675 by Q4 2025 and approach $4,000 by mid-2026. "We remain deeply convinced of a continued structural bull case for gold," said Natasha Kaneva, the bank's head of Global Commodities Strategy. JP Morgan also sees persistent demand from central banks.

"Add in economic, trade, and U.S. policy uncertainty and shifting, more unpredictable geopolitical alliances, and we think further diversification into gold will amount to around 900 tons of central bank buying in 2025," said Gregory Shearer, head of Base and Precious Metals Strategy.

With Russian exports redirected to China and official reserves increasing globally, central banks are expected to purchase around 900 tons this year, a significant rise from pre-pandemic levels.

Bernstein Research, meanwhile, challenges conventional forecasting. "Gold doesn't behave like copper or oil. It behaves like money," the firm stated, arguing that Wall Street underestimates gold's potential by relying on outdated models. Their updated framework — focusing on monetary policy and rate expectations — puts gold at $3,700/oz by 2026

A sharp rally in gold prices has boosted producers' cash flows, resulting in record quarterly earnings for top gold miner Agnico Eagle Mines (NYSE:AEM) and nearly $600 million in free cash flow. CEO Ammar Al Joundi recently said the management will prefer organic expansion over acquisitions.

Price Watch: SPDR Gold Shares ETF (NYSE:GLD) is up 29.32% year-to-date.

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