Spot gold prices have fallen on July 3, and as of 9:00 a.m., they were trading at $3,347.33 per ounce, down 9.77 points or 0.29%. Furthermore, spot gold prices in India closed yesterday at Rs 1,00,300.00 per 10 grams.

Key Factors That Affected The Gold Price Fall

Easing Geopolitical Tensions

Despite being a major factor in gold’s appeal as a safe haven in prior years, geopolitical concerns are now characterised as “less prevalent or muddled.” This includes continuing trade talks and an agreement between Iran and Israel on a truce. Investors typically move their money from safe-haven assets like gold to riskier, higher-yielding assets like equities when political unrest and international wars subside. This “risk-on” mentality may result in gold profit-taking.

US Dollar Strength

While the US dollar has generally weakened in the first half of 2025 due to various factors, including trade policy uncertainty and fiscal concerns, any short-term strengthening or stability in the dollar can put downward pressure on gold prices. Gold is priced in US dollars, so a stronger dollar makes it more expensive for international buyers. Hopes for positive trade deal discussions, especially ahead of any US tariff deadlines, can also contribute to a more stable or even stronger dollar, which in turn can lead to a slight decline in gold.

Interest Rate Expectations and Inflation

The US Federal Reserve has not issued a rate cut since December 2024, and while a cut is possible later in the year (likely September), the current “frozen” federal funds rate might not be providing the strong impetus for gold prices that lower rates typically do. Although inflation did technically rise slightly in May (from 2.3% to 2.4%), it is generally considered “cool.” When inflation is contained, gold’s appeal as an inflation hedge diminishes, which can contribute to a slight dip in prices.

More Downturn Ahead? 

While a slight downturn is observed today, the general sentiment from analysts, like J.P. Morgan Research, still indicates a “continued structural bull case for gold” throughout 2025 and 2026. This is primarily due to:

• Ongoing Recession Probabilities: Lingering concerns about a potential recession continue to support gold’s safe-haven appeal.
• Trade and Tariff Risks: Despite some easing, the unpredictable nature of trade policies and tariffs remains a supportive factor for gold.
• Persistent Central Bank Buying: Central banks, particularly in emerging markets, are expected to continue increasing their gold reserves, providing a strong floor for prices.
• Long-Term Inflation Concerns: Although inflation may be “cool” in the short term, the long-term outlook for inflation and potential currency debasement could keep gold attractive as a hedge.

Therefore, while minor fluctuations and corrections are normal, a significant or sustained downturn might not be the dominant trend for gold prices in the medium to long term, unless there is a drastic and sustained improvement in global economic stability and a significant shift in monetary policies.

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