Gold Monthly for June 2025

After four consecutive months of positive returns, Gold experienced a slowdown in May, though remaining relatively flat from April closing. The month was marked by significant geopolitical developments, including escalation between India and Pakistan, a mutual (but economically forced) agreement between the United States and China to lower tariffs, potential ceasefire discussions between Russia and Ukraine, and growing tensions in the Israel-Iran situation, all adding to global volatility. Despite the myriad of positive and negative influences stemming from these events, their effects appeared to be neutralized, resulting in gold broadly maintaining its levels. The dollar demonstrated a strong performance, and the yields were up to 4.4% from 4.1% at the end of April. Despite this, gold appeared more resilient.

Following the imposition of tariffs as high as 145% on imports from China, the United States adopted a more conciliatory approach by engaging in bilateral discussions with Chinese officials. Ultimately, a mutual agreement was reached whereby the United States would reduce its tariffs from 145% to 30%, while China would lower its tariffs from 125% to 10%. After the official announcement of these developments, the price of gold experienced a decline, falling by approximately 2% on the same day. In remarks to the press, President Trump indicated that, since some tariffs have been suspended rather than eliminated, there remains a possibility that they could be reinstated in three months if no further progress is achieved.

In the final week of May, the International Court of Trade ruled that the tariffs imposed by the Trump Administration were unlawful, subsequently nullifying their implications. In response, the Trump Administration filed a notice of appeal, indicating that the matter could escalate to the Supreme Court. The repercussions of this ruling extended beyond the Trump Administration, as the impact was also felt in the gold market. Post ruling, the price of gold experienced a decline of approximately 1%. The tariff situation continues to be extremely fluid and the uncertainty continues to loom large. A court ruled many Trump tariffs illegal, but an appeal allows them to remain in place for now. The broader issue is the government’s power to define “emergencies”.

Additionally, the minutes from the Federal Open Market Committee (FOMC) meeting served as a catalyst for market movements, as they conveyed positive sentiments regarding the current state of the economy. Recent economic data for April 2025 has challenged earlier concerns about rising inflation and slowing growth following the tariffs imposed by the Trump administration. Contrary to widespread expectations, the annual inflation rate in the United States declined to 2.3% in April, the lowest since February 2021, slipping from 2.4% in March and falling short of the predicted 2.4%. The 90-day pause on tariffs provided some relief, helping to mitigate abrupt economic impacts. Additionally, the U.S. Bureau of Labor Statistics reported an increase of 177,000 in total nonfarm payroll employment for April, with the unemployment rate holding steady at 4.2%. These figures collectively point to a stronger economic performance than anticipated despite tariff-related concerns. Following the release of this data, gold prices retreated from earlier gains, reflecting a market adjustment to these positive economic indicators and a reassessment of the initial fears surrounding economic deterioration. Additionally, the Consumer Confidence Index rose to 98 in May, well above economists’ consensus forecast for an 87, the Conference Board reported. However, we cant rule out the possibility of forward trading ahead of the Tariffs deadline leading to lower impact in the near term.

The Federal Reserve continues to uphold a cautious approach regarding interest rate adjustments this year. In the FOMC meeting held during the second week of May, the Fed opted not to implement any rate cuts, choosing instead to observe the actual impacts of economic data rather than responding to speculative views. Fed Chair Jerome Powell addressed the press, stating, “Despite heightened uncertainty, the economy is still in a solid position. The unemployment rate remains low, and the labour market is at or near maximum employment. Inflation has come down a great deal but has been running somewhat above our 2 percent longer-run objective.”

Outlook

The price of gold corrected close to 9% from the peak levels seen in April to hit a recent low of $3178. Given the unfolding situation on tariffs and geopolitical developments, there was a fair chance of unwinding some of premium from gold price to extend the correction. However, with Trump at the helm, its was a calm before the storm. Trump with its reinvigorated tariffs on Aluminum and Steel and challenging courts verdict on Tariffs legality is making his intentions clear. Also, the renewed escalations on geopolitics with Russia – Ukraine, Isarel Hamas is further bringing bids to gold, one can’t rule out further gains in gold prices.

Apart from the policy uncertainty in the US, the fundamental problem of rising deficits and unsustainable debt remains unresolved or rather amplified with Trumps “one big beautiful bill” which could add trillions of dollars to already burgeoning debt. This structural issue is the cornerstone of eroding confidence in the US economy and will lead to money fleeing US shores leading to a declining US dollar.

Although the Federal Reserve has adopted a stance of fewer rate cuts while monitoring economic changes, the possibility of a rate cut in the upcoming June meeting cannot be entirely dismissed. The Fed has indicated the potential for two rate cuts this year, one of which may be announced in June to ensure alignment with their goal of achieving 2% inflation and tackle increasing debt burden. The growing burden of national debt has been a pressing issue for the United States for some time. As of now, the debt stands at $36 trillion. Should a rate cut be announced by Chair Powell, it would likely serve as a tailwind for gold, resulting in an upward movement in prices.

As we have previously highlighted, central banks have been actively purchasing gold, and this trend persisted in the first quarter of 2025. Total gold demand, increased by 1% year-on-year to reach 1,206 tons, the highest level for a first quarter since 2016. During this period, central banks acquired 244 tons of gold, which, while representing a slowdown from the previous quarter, remains comfortably within the quarterly range observed over the last three years. Buying slowed down further to 12 tonnes in the month of April probably on account of the run away increases in prices and the heightened volatility amidst the tariff disruptions and geopolitical uncertainty. However, we maintain our view that central banks will continue to enhance their gold reserves to reduce their reliance on dollar due to policy uncertainty from the United States. This ongoing demand for gold is likely to help sustain price levels in the market.

The appreciation in gold prices through early 2025 reflects underlying economic shifts rather than fleeting speculation. Nevertheless, market fluctuations are inevitable, and price volatility should be expected as geopolitical and economic developments unfold. If trade tensions easing and global stability gradually improving, gold may undergo short-term corrections. Savvy investors should view these fluctuations as entry points to gradually build their gold positions, positioning themselves for long-term resilience amid ongoing uncertainty.

Source: Reserve Bank of India, World Gold Council

Above article is authored by Quantum.

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