Gold, one of the most trusted safe haven assets, has hit a pause. After an extraordinary rally that took it to a historic high of 3,500 dollars in April, the metal is now trading within a narrow band between 3,200 and 3,350 dollars. In India too, gold has held steady near Rs 98,220 for nearly two months. This sideways movement has raised the question on many investors’ minds   is the bull run over, or is this just a temporary pause?

Over the last twelve months, gold has delivered impressive returns. Year to date, it is up by 27 percent and over the last one year, the gains are around 40 percent. However, in the past three months, it has dropped by 4 percent from its peak. This is natural after such a steep climb, and financial markets often take breathers before deciding their next direction.

Many investors are waiting for new triggers. Some of the earlier factors that drove gold prices up seem to have eased. Tensions from geopolitical conflicts, including those involving Russia, Ukraine, Israel, and Iran, had initially pushed demand for gold higher. But with those situations appearing less intense at the moment, that particular pressure on prices has reduced.

Another major influence came from Trump-era tariffs that had raised concerns about a global trade slowdown. However, a softer tone from former President Trump and some deadline shifts have somewhat reduced the panic that these policies had created in the market. As a result, the market is not responding to them with the same level of urgency.

What matters now is the state of the United States economy, the dollar’s strength, and interest rate decisions. As of July 2025, the US federal debt has reached 36.62 trillion dollars. The interest payments alone have crossed 900 billion dollars in the first half of the year. If this pace continues, it is possible that annual interest outgo could soon surpass 1 trillion dollars.

This situation could become a major catalyst for gold. If the Federal Reserve decides to cut interest rates, it could ease the burden on the US government and potentially boost gold prices further. Lower interest rates reduce the appeal of interest-yielding assets, making gold a more attractive option for investors.

At present, the federal funds rate sits in the 4.25 to 4.5 percent range. Market experts expect as much as a 300 basis point cut starting as early as September. This has the potential to reinvigorate gold’s rally. Historically, gold and interest rates move in opposite directions. When rates fall, gold tends to rise, especially during uncertain times when investors prefer safer alternatives to stocks and bonds.

Adding to the mix is the performance of the dollar index, which has already dropped by over 9 percent this year and is trading below the 100 mark. A weakening dollar usually supports gold prices since it makes the metal cheaper for buyers using other currencies.

There is also a political angle. Donald Trump has openly criticized Jerome Powell, the Federal Reserve chair, for not cutting rates fast enough. Trump is pushing for a 3 percent rate cut, arguing that the delay is unnecessary. Though he has not called for Powell’s removal, the pressure from the administration is making global investors uneasy. The credibility of the Federal Reserve is crucial for financial stability. If that trust erodes, gold might benefit as investors seek protection in the yellow metal.

Meanwhile, central banks across the world are continuing to buy gold in large quantities. This institutional demand provides further support to gold prices, even as individual investors wait for fresh cues. Investment into gold-backed funds is also holding steady, indicating that many still see long-term value in the asset.

The coming months will be critical. Investors are advised to track US economic data, monitor developments related to interest rates, and follow the dollar index closely. These elements will likely guide gold’s next move. Until then, the market may stay in a tight range, but the long-term story for gold remains far from finished.

 

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