Gold surges past $3,320 as investors flock to safety, will this rally bust?

Gold prices climbed higher on Tuesday, July 1, as the continued weakening of the US dollar and renewed concerns over potential trade tariffs led investors to seek refuge in the yellow metal. Spot gold in early Asian trading rose 0.6% to $3,322.55 per ounce, while US gold futures increased by 0.8%, reaching $3,334.80 per ounce. In India, 24-karat gold was priced at ₹98,400 per 10 grams, reflecting the global trend. The US dollar index dropped by 0.2%, hitting a 43-month low. A weaker dollar tends to make gold more affordable for holders of other currencies, thus boosting global demand.

Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, noted that “Gold traded positive as dollar weakness continued to support prices.” He added, “Comex Gold surged by $30 to $3,345, while MCX Gold rose by ₹1,200, settling around ₹97,300. The sentiment remains buoyant this week, driven by expectations around key US economic data, particularly the Non-Farm Payrolls, unemployment figures, and ADP non-farm employment change. Gold price range is expected between ₹96,500 – ₹97,850 and $3,310 to $3,375.”

Despite gold’s impressive performance, experts caution that the asset’s price trajectory might not be entirely smooth in the future. Over the past 28 months, gold prices have doubled, climbing from $1,630 per ounce in October 2022 to near $3,260. However, the road ahead may be bumpy, as few asset classes can sustain such linear growth indefinitely. Several factors have propelled gold’s rise, including persistent geopolitical tensions and increased purchases by central banks seeking security amid economic uncertainty.

A report from the World Gold Council indicates that 43% of central banks plan to increase their gold reserves over the next year, reflecting continuing institutional confidence in the asset. In addition, the US Federal Reserve’s potential interest rate cuts, expected to be between 200 to 300 basis points over the next two to three years, could positively impact non-yielding assets like gold. Such monetary policies have historically favoured gold’s performance.

However, 2025 has presented mixed signals for gold. While the asset has demonstrated a 27% gain this year, recent months have seen a modest retreat in prices. Over the past month, gold prices have decreased by approximately half a percentage point, and a 2% drop has occurred in the last two months, pulling back from its near-record high of $3,500 in April. Analysts suggest this retreat might offer long-term investors an opportunity to buy on dips, though they advise caution due to potential sharp corrections.

In these uncertain times, gold continues to gleam as a safe haven for investors. Nonetheless, many industry experts recommend limiting exposure to gold within investment portfolios to balance safety and risk effectively. Caution is advised, as the global political and economic landscape remains volatile, and investors should proceed with diligence. As always, a diversified approach can help mitigate risks associated with market fluctuations.