Gold set for best weekly gain since April amid rising US fiscal worries

Gold prices are on track for their best weekly performance in over a month, buoyed by a decline in the US dollar and investor unease over America's fiscal outlook, which has revived demand for the metal as a traditional safe haven.

As of early Friday trading in Asia, spot gold was up 0.3% to $3,303.09 an ounce, while US gold futures rose 0.2% to $3,302.80.

Bullion is up 3% so far this week, making it the strongest weekly performance since the first week of April.

Dollar’s slump boosts gold attractiveness

A sharp retreat in the US dollar this week has made dollar-priced gold more appealing to foreign investors.

The dollar index has dropped over 1% so far, marking its worst week since April 7.

“This week, trade optimism has somewhat given way to worries about the U.S.'s fiscal situation, and the resulting hesitancy towards U.S. assets has put gold back in the frame with investors,” said Tim Waterer, chief market analyst at KCM Trade in a Reuters report.

Investors are increasingly concerned about the United States’ growing debt burden.

On Thursday, the House of Representatives passed a wide-ranging tax and spending bill, aligned with former President Donald Trump’s policy platform, which could add trillions of dollars to the national debt.

The bill now moves to the Senate, where Republicans hold a narrow majority.

Meanwhile, the Treasury Department on Wednesday encountered tepid demand for a $16 billion auction of 20-year bonds.

The sale followed a decision by Moody’s last week to strip the US of its triple-A credit rating, a move that has further unsettled market sentiment.

Geopolitical tensions add to gold’s momentum

Heightened geopolitical risks also contributed to gold's surge.

Iran’s Foreign Minister Abbas Araqchi warned that the US would bear legal responsibility for any Israeli attack on Iranian nuclear facilities, following media reports suggesting Israel is preparing military action.

Such developments have historically driven investors toward gold, which is seen as a reliable store of value during times of political instability and financial uncertainty.

Retail demand in Asia diverges amid higher prices

Physical demand for gold in Asia remained mixed this week.

In India, higher global prices and a weaker rupee dampened retail interest. Dealers in the country were offering discounts of up to $49 an ounce over official domestic prices, compared with $34 last week.

Domestic prices rebounded to around 95,900 rupees per 10 grams, up from a one-month low of 90,890 rupees last week.

“Jewellers are not interested in building inventory at this price level since retail demand is weak. Besides, they are getting a lot of old jewellery in exchange for new jewellery,” said a Mumbai-based bullion dealer.

In contrast, demand in China remained firm, with dealers charging premiums of $16 to $30 per ounce over spot prices.

Analysts noted strong conviction among Chinese investors despite recent price volatility.

Premiums in Hong Kong and Singapore were more modest, ranging from par to $2.50 an ounce, while Japanese dealers reported premiums of up to $1.