Gold holds gains

Gold hovered above $3,340 per ounce on Wednesday, maintaining an over 1% gain from the previous session, as the precious metal continued to benefit from persistent weakness in the US dollar, alongside heightened fiscal concerns and trade policy tensions.

The weaker greenback—pressured by fears of growing federal debt and expectations of looser monetary policy—has bolstered demand for dollar-denominated assets like gold, making them more attractive to foreign investors.

A key driver of market sentiment was the Senate’s passage of President Trump’s sweeping tax-and-spending legislation, often referred to as the "megabill." The measure, which now returns to the House for final approval, is expected to add $3.3 trillion to the national debt over the coming decade. The fiscal expansion has amplified anxieties about long-term debt sustainability and its implications for inflation, both of which tend to be supportive of gold prices.

Trade tensions also reemerged as a market-moving theme. President Trump expressed frustration over stalled trade negotiations with Japan, threatening to impose a 35% tariff on Japanese imports. This rhetoric has added to global trade uncertainty, which continues to weigh on investor sentiment and supports safe-haven demand for gold in the short term.

On the monetary policy front, markets remain focused on the US Federal Reserve’s next move. While Fed Chair Jerome Powell reiterated a cautious stance, emphasizing that the central bank is “patient” on rate cuts, he did not rule out a potential reduction as early as this month.

Adding to the speculation, Treasury Secretary Scott Bessent stated that he expects the Fed to initiate rate cuts by September, fueling expectations that easier monetary conditions could be on the horizon. Such a shift would likely further pressure the dollar and lower real interest rates—both positive drivers for gold.

However, geopolitical tensions have eased slightly, potentially limiting gold’s upside. President Trump announced that Israel had agreed to a 60-day ceasefire in Gaza, while warning Hamas to comply with the terms or face deteriorating conditions. The de-escalation in Middle East hostilities has somewhat dampened gold’s traditional safe-haven allure, though underlying geopolitical risks remain a background concern.

Looking ahead, investors are keenly watching upcoming US labor market data, particularly the nonfarm payrolls report due Thursday, in this holiday-shortened week. Any signs of labor market softness could solidify the case for imminent Fed rate cuts and provide further upward momentum for gold.

In summary, gold continues to trade with a bullish undertone, supported by a complex mix of monetary, fiscal, and geopolitical factors. As uncertainty lingers across multiple fronts, the metal remains an attractive hedge for investors seeking safety and inflation protection.