The start of the week saw the price of gold surge by 4.8% to reach $3,358.13 as concerns among investors about the growing U.S. deficit and President Trump’s renewed threats of tariffs continued to fuel market uncertainty.
Major credit rating agency Moody’s also downgraded America’s credit, calling attention to the country’s debt levels. This unsustainable debt is further compounded by the approval of Trump’s tax-and-spending package, which could add almost $4 trillion to the deficit. This has many fearing that America is spending far more than it can afford.
During this period, treasury yields have surged on supply concerns, with 30-year yields hitting 5.14%, the highest rate in years.
With so much new debt expected, some investors worry that the surging issuance of bonds and the Fed subsequently having to monetize the debt may lead to inflationary pressures and in turn, make government securities less attractive to investors.
The dollar index has also recorded a significant drop, marking its weakest performance since mid-April. This decline signals a growing shift among investors away from assets denominated in dollars. Despite a rise in long-term Treasury yields, the dollar’s weakness reflects doubts about the underlying cause of those yield increases.
Rather than being driven by economic strength, the gains appear linked to fiscal uncertainty and heightened risk premiums. Short positions against the dollar have surged to $17.3 billion and foreign investors are increasingly scaling back their U.S. asset holdings, further supporting the appeal of gold as a safer alternative.
Market volatility has also intensified after President Trump threatened to impose 50% tariffs on EU imports from June 1st and floated a 25% tariff on iPhones not made in America. These announcements rattled global equities and spurred additional flows into gold, seen as a haven during uncertainty.
Analysts highlighted the unexpected mention of Apple products as a potentially pivotal moment in the administration’s trade stance. These tariff threats added to existing concerns over fiscal instability and the weakening dollar, further boosting gold demand.
Gold prices remain comfortably above key technical support levels at $3166.46 and $3018.52, finishing the week near recent highs. The market sentiment continues to favor the upside, with investor behavior reflecting ongoing anxiety over U.S. fiscal management and the dollar’s reliability.
Unless there’s a sharp turnaround in Treasury yields or a major shift in policy, gold seems poised to challenge resistance levels at $3435 and possibly $3500 in the short-term. Traders are advised to closely follow developments in U.S. fiscal policy and global trade dynamics for further direction.
The long-term prospects of gold remain bullish and this is welcome news to companies like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) that have an increased chance of attracting investor interest and bolstering their growth prospects.
NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF
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