Gold prices rose in European trading on Friday, resuming gains that had briefly paused the previous day, and heading toward a weekly advance. The metal found support from safe-haven demand amid mounting concerns over U.S. fiscal stability linked to former President Donald Trump’s tax and spending legislation.
The U.S. dollar’s recent rebound also lost steam in forex markets, with traders awaiting further clarity on whether the Federal Reserve could cut interest rates before September.
The Price
Gold rose 0.55% to \$3,345.14 per ounce, after opening at \$3,326.30 and touching a session low of \$3,323.72.
On Thursday, the metal had fallen 0.95%, marking its first loss in three sessions following strong U.S. labor market data.
Trump’s Tax Bill
Trump’s proposed tax-cut legislation cleared its final hurdle in Congress on Thursday. The bill would fund his immigration agenda, make the 2017 tax cuts permanent, and introduce new tax breaks pledged during his 2024 campaign.
The nonpartisan Congressional Budget Office estimates the bill would add \$3.4 trillion to the U.S. national debt — which currently stands at \$36.2 trillion — over the next decade.
U.S. Dollar
The U.S. Dollar Index fell 0.25% on Friday, resuming losses after two sessions of recovery from a three-year low of 96.38. The decline reflects renewed weakness in the greenback against a basket of major and minor currencies.
As commonly observed, a weaker dollar boosts the appeal of dollar-denominated gold for holders of other currencies.
U.S. Interest Rates
Labor market data released Thursday showed the U.S. economy added 147,000 jobs in June, beating expectations of 111,000. The unemployment rate fell to 4.1% from 4.2%, while forecasts had pointed to a rise to 4.3%.
Following the report, CME Group’s FedWatch tool showed odds of a 25-basis-point rate cut at the July meeting dropping from 25% to just 5%, while the chance of rates staying unchanged rose from 75% to 95%.
Market pricing for a 25-basis-point cut in September also dropped, from 95% to 70%, with the probability of no change in rates increasing from 5% to 30%.
Fed Chair Jerome Powell noted that tariffs have altered the central bank’s rate trajectory.
Outlook for Gold
Edward Meir, analyst at Marex, commented: “Trump’s bill does nothing to restore U.S. fiscal order. Over the long run, that’s bearish for the dollar and bullish for gold.”
Meir added: “If Trump holds firm on July 9 as a deadline and reimposes tariffs, the dollar will almost certainly weaken, potentially pushing gold higher.”
SPDR Holdings
Holdings in the SPDR Gold Trust — the world’s largest gold-backed exchange-traded fund — were unchanged on Thursday, holding steady at 947.66 metric tons, the lowest level since June 18.
