Asian markets edge higher, gold shines as investors await US policy clarity

Asian equity markets moved cautiously higher on July 1, buoyed by record gains on Wall Street and optimism surrounding ongoing global trade negotiations, even as political and economic uncertainty in the United States kept investors on edge. A weaker dollar, falling oil prices, and renewed demand for safe-haven assets like gold reflected growing anxiety ahead of crucial US policy decisions, including a massive tax-and-spending bill and looming tariff deadlines.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 per cent, led by South Korea’s Kospi, which climbed 1.8 per cent. However, Japan’s Nikkei 225 fell 1.1 per cent as the yen strengthened, while broader indices such as Australia’s S&P/ASX 200 and India’s BSE Sensex traded flat. Hong Kong markets remained closed for a public holiday.

Investors remained fixated on the fate of President Donald Trump’s sweeping tax and spending package, estimated to add $3.3 trillion to the US debt pile. The bill, dubbed the “One Big Beautiful Bill” by the president, has sparked intense debate in the Senate, with Republicans and Democrats battling over a flurry of amendments. Trump has urged passage before the July 4 holiday.

Meanwhile, the 90-day reprieve on Trump’s reciprocal tariffs is set to expire on July 9, heightening tensions with trading partners. US Treasury Secretary Scott Bessent signalled progress with some nations but warned that tariffs could “spring back” to previously announced levels if negotiations stall. The uncertainty weighed on sentiment across Asian markets, where export-driven economies are especially vulnerable.

Gold climbs as safe-haven demand grows

Gold prices extended gains on July 1, supported by a falling US dollar and rising investor demand for safe-haven assets amid geopolitical concerns and policy ambiguity. Spot gold rose 0.6 per cent to $3,322.55 per ounce in early Asian trading, while US gold futures gained 0.8 per cent to $3,334.80. The US dollar index dropped 0.2 per cent, touching a 50-month low. A weaker dollar typically boosts gold demand by making it cheaper for holders of other currencies.

Indian domestic prices also mirrored global trends. 24-karat gold traded at ₹98,400 ($1,147) per 10 grams, while 22-karat stood at ₹90,200 ($1,052). Analysts expect an upward bias in gold prices to persist in the near term.

Market participants are now closely watching the upcoming US jobs report due on July 3, which could influence the Federal Reserve’s stance on interest rates. Any signs of economic softening may strengthen the case for rate cuts, potentially boosting gold further.

Oil slides as supply outlook weighs

Crude oil prices continued their downward trend, pressured by expectations of increased supply from OPEC+ and concerns over slowing demand due to trade tensions. Brent futures for September delivery fell 0.46 per cent to $66.43, while WTI August contracts dropped 0.49 per cent to $64.79 per barrel.

OPEC+ is expected to hike output by another 411,000 barrels per day in August, the fourth straight monthly increase. Analysts from ING Think noted that with recent supply additions, the global oil market could return to a surplus in Q4 2025, eroding the geopolitical risk premium that previously supported prices. Domestic oil futures followed suit. On the MCX, July crude contracts fell 0.48 per cent to ₹5,554 ($64.76), while August contracts slipped 0.42 per cent to ₹5,469 ($63.77).

Despite easing tensions between Israel and Iran, markets remain alert to potential disruptions. Trump’s latest criticism of Japan for refusing US rice imports, posted on Truth Social, underscores the fragile nature of ongoing trade talks. With critical US economic data and policy decisions looming, investors remain on guard, balancing cautious optimism with the risk of renewed volatility in global markets.