Gold Under Pressure as Geopolitical Tensions Ease and U.S. Debt Crisis Looms
Waleed Farouk
As the first half of 2025 draws to a close, gold is facing selling pressure due to easing geopolitical tensions in the Middle East, which have revived global risk appetite. At the same time, silver continues to close the performance gap with gold, having tested the $36 per ounce level—a move analysts view as confirmation of a sustained upward trend.
Despite the fading 'war premium' in gold prices, the ongoing decline of the U.S. dollar—whose index has fallen below the key technical support level of 98—has kept gold and silver futures trading within bullish consolidation ranges. Gold remains supported above $3,200 per ounce, while silver holds above $35.
The term 'war premium' refers to a temporary increase in asset prices—especially gold and oil—caused by geopolitical tensions or the outbreak of war.
U.S. Debt Crisis Clouds Market Outlook
In Washington, Republicans are struggling to pass a sweeping tax-cut and spending bill ahead of the July 4 deadline set by President Donald Trump. The proposed legislation is expected to add about $2.4 trillion to the national debt over the next decade, raising alarms about long-term fiscal sustainability.
According to the latest data, total federal spending in May alone reached $687 billion, while revenues stood at only $371 billion, resulting in a staggering monthly deficit of $316 billion. Interest payments on the debt hit $92 billion—exceeded only by healthcare and Social Security expenditures.
Trump Slams Powell as Fed's Independence Questioned
Market anxiety escalated after former President Donald Trump labeled Fed Chair Jerome Powell 'terrible,' suggesting he may replace him before his official term ends in May 2026. Amid growing political pressure on the Federal Reserve, the U.S. dollar has fallen more than 10% since the start of the year—marking the steepest half-year drop since the 1970s.
Stagflation Fears Resurface as Hormuz Threat Rises
Despite a declared ceasefire between Israel and Iran at the start of the week, sporadic clashes continue. Iran has threatened to shut down the Strait of Hormuz—a vital passage for 25% of global oil exports and 20% of liquefied natural gas shipments.
Experts warn that any real closure of the strait could lead to a massive spike in oil prices, potentially triggering a global recession and a stock market sell-off exceeding 20%, similar to the oil shock of 1973.
The Fed Trapped Between Inflation and Recession
While the Federal Reserve has maintained its projection of two rate cuts in 2025, it raised its year-end inflation outlook to 3.1%, up from 2.5% in April—well above its 2% target.
John Williams, President of the Federal Reserve Bank of New York, said slower growth and higher prices are likely, fueled by trade tariffs and reduced immigration. Meanwhile, revised GDP figures revealed that the U.S. economy contracted more sharply than initially estimated in Q1.
Gold and Silver Regain Safe-Haven Appeal
As global confidence in fiscal sustainability erodes, gold is once again viewed as a safe-haven asset free from counterparty risk—unlike sovereign bonds, which no longer serve as reliable stores of value.
Gold and silver mining stocks are undergoing healthy corrections after strong Q2 rallies. Meanwhile, high-risk junior miners are showing strong momentum, supported by a technical breakout in Canada's TSX Venture Index (TSX-V), which is composed of roughly 50% junior mining companies.
Although the index remains 75% below its 2007 all-time high, it has made notable gains this year. A return to the 1,113-point level seen in January 2021 would represent a 75% upside from current levels.
In today's environment of high market volatility and elevated geopolitical and economic uncertainty, relative strength continues to favor gold, silver, and related equities—particularly high-quality junior miners. As investors hedge against inflation and mounting sovereign debt risks, capital continues to flow into assets that operate outside the traditional monetary system—led by gold.
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Waleed Farouk Gold prices recorded a notable decline in the local Egyptian market on Saturday, coinciding with the weekend closure of global exchanges. This came after the international ounce dropped by 2.8% at the end of the trading week, weighed down by easing geopolitical tensions and improved global trade prospects. According to the latest market data, gold prices in Egypt fell by EGP 25 per gram during Saturday's trading compared to the previous day. The price of 21-karat gold settled at EGP 4,600 per gram, while the global ounce dropped by $95, closing the week at $3,274. The 24-karat gram was priced at EGP 5,257, 18-karat at EGP 3,943, and 14-karat at EGP 3,067. The price of the gold pound stood at EGP 36,800. On Friday, gold prices in the local market had already fallen by EGP 70 per gram, as 21-karat gold opened at EGP 4,695 and closed at EGP 4,625. Simultaneously, the international ounce slid by $60, from $3,334 to $3,274. Risk Appetite Weighs on Gold The decline occurred despite traditionally supportive factors for gold, such as a weaker US dollar and expectations of interest rate cuts. However, growing investor appetite for risk shifted capital toward high-yield assets, placing additional selling pressure on bullion. The signing of a formal trade agreement between the United States and China, along with statements from US officials suggesting more deals may follow before July 9, helped boost market confidence. Notably, China announced its readiness to expedite shipments of rare earth minerals to Washington, reinforcing optimism around global trade relations. Geopolitical Shifts Ease Safe-Haven Demand On the geopolitical front, Iran signaled openness to diplomacy with the United States, while Al Arabiya reported that the Israel-Gaza conflict could end within two weeks — developments that reduced geopolitical risk premiums and weakened gold's safe-haven appeal. 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Minneapolis Fed President Neel Kashkari reaffirmed his forecast for two rate cuts in 2025, noting that the economic impact of trade conflicts might be less severe or more delayed than previously anticipated. Meanwhile, in Washington, the Biden administration is facing growing challenges to pass a proposed tax cut and spending bill before the self-imposed July 4 deadline. The plan is estimated to add approximately $2.4 trillion to the national debt over the next decade. Treasury Department data revealed that the federal deficit reached $316 billion in May alone, with interest payments on debt soaring to $92 billion — second only to Medicare and Social Security — raising fears of an impending debt crisis. Political Pressure on the Fed Market anxiety was further fueled by comments from former President Donald Trump, who criticized Fed Chair Jerome Powell as 'terrible' and hinted at replacing him before his term ends in 2026. 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