Gold Prices Dip from Two-Week High as Dollar Gains, U.S. Debt Concerns Linger

Gold prices retreated from a two-week peak on Thursday, declining 0.3% to $3,303.82 per ounce after reaching $3,314.50 earlier in the session, the highest since May 9. The drop was driven by a 0.2% uptick in the U.S. dollar index (DXY), which rose to 101.65, making gold more expensive for holders of other currencies.

Despite the pullback, gold remained above the $3,300 mark, supported by growing concerns over the U.S. government’s escalating $36 trillion debt and fiscal uncertainties following President Trump’s proposed tax cuts. U.S. gold futures also fell 0.3% to $3,304.10, reflecting cautious market sentiment amid mixed economic signals.

Dollar Strength Weighs on Gold

The modest recovery in the dollar, which edged up from a two-week low, prompted profit-taking among gold investors, according to independent analyst Ross Norman. "Those booking profits are driving the selling, and the dollar's recovery has diminished the appeal of gold," Norman observed.

Real-time market data shows the dollar’s strength was partly fueled by a risk-off mood on Wall Street, following a lackluster $16 billion U.S. Treasury 20-year bond auction on Wednesday, which saw yields rise to 4.85%, the highest in three months. Investors holding other currencies found gold less appealing due to this dollar uptick, which contributed to the price decline.

U.S. Debt Worries Support Gold’s Floor

Despite the dip, gold remains supported by growing unease over U.S. fiscal health. Moody’s downgrade of the U.S. sovereign credit rating last week, citing the nation’s $36 trillion debt burden, has heightened market anxiety.

Additionally, Trump’s tax-cut bill, which cleared a procedural vote in the House of Representatives on Thursday, could add trillions to the debt if passed, according to analysts. “Concerns about U.S. debt management suggest gold will remain firm if markets react negatively to these tax cuts,” Norman added.

Gold, a traditional safe-haven asset, often gains traction during periods of political and financial uncertainty, a trend reinforced by recent safe-haven buying amid global trade tensions.

Did You Know?
Gold has been a store of value for over 5,000 years, with the first gold coins minted by King Croesus of Lydia (modern-day Turkey) around 550 BCE, marking the beginning of standardized currency.

Broader Precious Metals Market Trends

Other precious metals also faced downward pressure on Thursday. Spot silver dropped 0.7% to $33.14 per ounce, platinum fell 0.7% to $1,068.97, and palladium saw a steeper decline of 2%, settling at $1,015.97.

Market sentiment reflects growing interest in silver as an alternative safe-haven asset, with some investors noting its industrial demand as a potential upside driver amid a global push for green energy.

Industry reports indicate silver demand for solar panel production rose 12% year over year in Q1 2025, potentially offering a counterbalance to its current price weakness.

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Market Outlook Amid Fiscal Uncertainty

As the U.S. House debates Trump’s tax and spending bill, investors are closely monitoring its potential impact on federal debt and inflation. A passage could further weaken the dollar in the long term, potentially lifting gold prices toward $3,350, a level last tested in late 2024.

However, near-term dollar strength and profit-taking may cap gains. Markets are also awaiting the next U.S. consumer price index report, due in June, for clues on inflationary pressures that could influence the Federal Reserve’s rate decisions and, in turn, gold’s appeal as a non-yielding asset.