Gold prices remain subject to sharp fluctuations, with no definitive directional trend emerging as of early June 2025. Renewed geopolitical uncertainty and the escalating trade conflict between the United States and China are proving to be key catalysts for recent volatility in the precious metals market. As investors seek clarity in uncertain times, the outlook for gold remains complex and reactive to global macroeconomic and political developments.
After posting a weekly decline of 2.02% for the period ending 30 May, spot gold prices have rebounded sharply at the start of this week, supported by renewed safe-haven demand. The immediate trigger appears to be rising tensions between the US and China, as well as ongoing instability in Eastern Europe.
On Monday, Beijing accused Washington of violating the existing US-China trade truce following the imposition of additional US restrictions on chip-related technologies. These include tighter curbs on the export of critical jet engine parts to China, broader regulatory action targeting Chinese subsidiaries, and visa revocations for students linked to the Chinese Communist Party or studying sensitive disciplines. In response, China has reportedly delayed approvals for rare earth exports, a strategic countermeasure affecting US industry.
In parallel, the global economic backdrop continues to send mixed signals. US manufacturing data released Monday showed contraction for a third consecutive month. The ISM manufacturing index printed at 48.5—below the forecasted 49.5—while its import component fell to a 16-year low. The export gauge also dropped to a five-year low. Furthermore, construction spending in April declined by 0.4%, defying expectations of a 0.2% increase.
European data offered marginally more stability. The Eurozone’s final manufacturing PMI for May came in at 49.4, aligning with estimates. The UK manufacturing PMI surprised to the upside, registering 46.4 versus the projected 45.1.
On the investment front, global gold ETF holdings stood at 88.508 million ounces as of 30 May. Significantly, this marked the first weekly inflow after five consecutive weeks of outflows, bringing year-to-date inflows to 6.82%.
Market participants are now closely monitoring a series of pivotal economic indicators due later this week. These include the ECB’s monetary policy decision on 5 June, where the central bank is widely expected to implement a 25 basis point rate cut—its eighth reduction since initiating an easing cycle in June 2024. Key US data such as JOLTs job openings, ADP employment change, ISM Services, and non-farm payroll figures are also due. Meanwhile, investors are tracking China’s manufacturing and services PMIs and the Eurozone’s services data for broader global context.
On the geopolitical front, developments in the Russia-Ukraine conflict continue to pose systemic risk. On 1 June, Ukraine’s Security Service launched a significant drone strike inside Russian territory, reportedly damaging 41 aircraft. Despite peace talks held in Istanbul on 2 June, the outlook for a lasting resolution remains bleak.
Currency markets are responding accordingly. The US Dollar Index has slipped to 98.71, its lowest level since April 2022 excluding the tariff-induced dip in April 2024. Leading institutional investors have been scaling back their bullish forecasts on the greenback, adding further pressure. Concurrently, US 10-year and 30-year Treasury yields rose by 0.90% to 4.44% and 4.9781%, respectively.
From a technical perspective, gold may gain further support if it closes above $3,372. Analysts advise adopting a buy-on-dips strategy with stop-loss levels set at $3,325 or $3,300. Should geopolitical risks escalate further and the dollar remain under pressure, gold could test key resistance at $3,400, followed by potential moves towards $3,414 and $3,435. Market watchers are advised to stay alert to ongoing US-China trade dynamics to better manage risk exposure.
-Times of India
