Gold prices surged to a new all-time high of $3,149.00 per ounce on Tuesday, continuing its strong upward trajectory for the fourth consecutive day. The precious metal is on track for its fifth consecutive week of gains, up 18% year-to-date, outperforming major US stock indices. This surge is driven by escalating concerns about global trade tensions, particularly surrounding President Trump’s tariff rollout, which is intensifying fears of a global trade war.
Key Drivers of the Gold Rally
Safe-Haven Demand: Amid global trade uncertainties, gold remains the go-to asset for investors seeking refuge. Trump’s impending tariffs have spooked markets, with investors flocking to gold for protection against potential inflation and economic slowdowns.
Central Bank Buying: Global central banks have been steadily increasing their gold holdings, with acquisitions surpassing 1,000 tons annually. This strategy of diversifying reserves away from the US dollar has fueled continued demand for the metal.
Declining US Treasury Yields: The recent fall in US Treasury yields has weakened the dollar, which in turn has boosted gold’s appeal. Lower yields reduce the opportunity cost of holding non-yielding assets like gold.
Geopolitical Tensions: Rising tensions, particularly around the US’s tariff threats and the ongoing conflict in Ukraine, have reinforced gold’s status as a safe-haven asset.
Strong Demand from India and China: Physical gold demand, especially from these two major markets, has supported the upward momentum.
What’s Next for Gold Prices?
With gold currently trading well above key technical levels, including the 261.8% Fibonacci extension of the September 2022-May 2023 advance at $2,995.85 per ounce, the next target lies at $3,755.00, as projected by the 161.8% Fibonacci extension from the January 1999 to July 2011 advance.
Risk Factors to Watch
Stronger US Dollar: While unlikely given the dollar’s recent decline, any significant rebound in the US dollar could challenge gold’s upward momentum.
Ukraine-Russia Peace Talks: Any positive developments here could weaken gold temporarily, but geopolitical tensions in the region remain high, maintaining gold’s safe-haven status.
Interest Rate Moves: Decisions from major central banks, especially the Federal Reserve, will remain crucial. Current market fears of stagflation suggest that lower interest rates could continue to support gold.
In conclusion, with the technical target of $3,755 still in play, gold remains in a strong uptrend driven by geopolitical concerns, declining yields, and strong physical demand. However, investors should remain mindful of the potential risks posed by a stronger US dollar and shifting central bank policies.
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