Gold Monthly for July 2025

We are already halfway through 2025, and it will be safe to look back and say, ‘It was all Yellow’. Gold has demonstrated a spectacular performance since the beginning of this year with a surge of around 26% YTD. June 2025 saw a sharp spike, but later some of the gains were compromised by the end of the month, with the metal rising by about 1%. Gold looked strong in the light of escalating war situation between Israel and Iran with US being involved closely in the situation and the long going tensions between Russia and Ukraine. With the de-escalation, gold unwound some of that premium but still managed to deliver positive returns m-o-m. The dollar was under pressure throughout the month and plunged by around 2.7%, yielding some support to gold. The bond yield in the U.S. now stands at 4.2% lower from 4.4% at the end of May 2025.

Last month was rife with geopolitical developments of an unprecedented scale. Starting the month with Ukrainian drones’ attack targeting air bases deep within Russia, specifically aiming at nuclear-capable long-range bombers. This marked the largest attack by Ukraine on Russia since the onset of the war in 2022, leading to a big jump in gold on fears of escalation. Israel initiated Operation ‘Rising Lion’ against Iran, focusing on nuclear facilities and the capital, Tehran. As Iran retaliated and geopolitical tensions escalated, both gold and crude oil benefited from the heightened risk environment. Subsequently, the United States’ official involvement with an airstrike on Iran, further supported gold. However, following a ceasefire between Israel and Iran led to unwinding of much of the geopolitical premium.

In its last meeting, the Federal Reserve opted not to lower interest rates despite seeming comfort on inflation and unemployment levels which appear to be well under control for now. However, the central bank has expressed no urgency to reduce rates and intends to await to see the tangible effects of the tariffs.

Economic data continues to be mixed at best. The Consumer Price Index (CPI) was reported at 2.4%, reflecting a 0.1% increase, in line with expectations. The unemployment rate in May 2025 remained unchanged at 4.2%. A total of 139,000 nonfarm payroll jobs were added during the month, providing some relief for the Federal Reserve and the U.S. economy, particularly given that inflation had been characterized as sticky and recessionary fears had been prevalent just a few months prior. However, new home sales experienced a significant decline of nearly 14% last month, reaching a seasonally adjusted annualized rate of 623,000 homes, down from April’s revised rate of 722,000. Compared to last year, new home sales are down 6.3%, pointing to a slowdown.

Outlook

As the current situation has developed, it appears that economies are in relatively stable condition, geopolitical tensions have eased, and there is a perplexing but noticeable restoration of confidence in equity markets.

The relative strength of the banking sector compared to equity markets and credit spreads in the U.S. both point to improving confidence. In this context, if no new factors arise, there may be an unwinding of the premium associated with gold, resulting in a potential correction or consolidation in prices. This probably looks like the evolving base case until we see further tariff related uncertainty, geopolitical disruptions or evidence of the U.S. slipping in a recession which could be a distant few months from here.

The 90-day pause on tariffs announced by Trump, related to Liberation Day, is approaching its deadline on July 9, and a comprehensive agreement has yet to be reached. This situation will be an important factor to look at, as uncertainty remains regarding the outcome, particularly with the trade court already involved in the matter. Trump has already halted talks with Canada and probably may announce new tariffs soon. Should there be an abrupt decision or a reimposition of tariffs by Trump, gold may once again be a favoured asset.

China added 60,000 ounces to its gold reserves in May 2025, marking its seventh consecutive month of net gold purchases and bringing the total to 73.83 million ounces. Gold now accounts for 7% of the country's international reserve assets, representing a sharp increase from levels prior to the pandemic and Russia's invasion of Ukraine. India’s gold reserves rose to $83.316 billion as of June 13, 2025, an increase from $67.092 billion as of January 3, 2025. Currently, gold reserves constitute over 12 percent of India’s net foreign assets. European central banks have also been accumulating gold reserves. This trend is likely to continue in the future and will serve as a strong driving factor for gold in the long term.

The rise in gold prices observed in 2025 is indicative of fundamental economic changes rather than mere short-term speculation. The structural problems of rising deficits and debt aren’t resolved yet. It is important to recognize that market fluctuations are a natural occurrence, and price volatility is likely as geopolitical and economic events continue to evolve.

As trade tensions ease and global stability shows signs of improvement, gold may experience short-term corrections. In this context, astute investors might consider these fluctuations as opportunities to incrementally build their gold allocation, thereby positioning themselves for long-term stability in an environment characterized by high uncertainty.

Above article is authored by Quantum.

View All