Gold extended its upward momentum in February, reaching multiple record highs before experiencing a slight pullback to close the month at $2,835 per ounce, reflecting a 0.8% monthly increase. This trend was observed across all major global currencies, with gold registering fresh all-time highs, underscoring its appeal as a safe-haven asset amid ongoing economic and geopolitical uncertainty.
Market Drivers: Dollar Weakness, Geopolitical Risk, and Falling Interest Rates
According to the Gold Return Attribution Model (GRAM), several key factors contributed to gold’s strong performance in February. A weaker U.S. dollar played a pivotal role, reducing the opportunity cost of holding gold and making it more attractive to investors. Additionally, rising geopolitical tensions—including concerns over trade policies and global economic stability—reinforced gold’s role as a hedge against uncertainty.
Another major factor was the decline in interest rates, which typically benefits gold by reducing the appeal of interest-bearing assets. While January’s significant price rally introduced some technical headwinds, sustained flight-to-quality demand helped offset any negative pressure, keeping investor sentiment bullish.
Strong ETF Demand Reflects Renewed Investor Confidence
One of the most notable trends in February was the surge in gold-backed exchange-traded fund (ETF) inflows, which totaled $9.4 billion (100 metric tons)—the highest monthly net inflow since March 2022. The increase was largely driven by U.S. and Asian-listed ETFs, signaling strong institutional and retail investor demand for gold amid market volatility.
At the same time, continued inflows into COMEX gold inventories further underscored investor interest, with market participants seeking exposure to physical gold as part of their portfolio diversification strategies. Uncertainty surrounding tariffs and global trade policies also contributed to these inflows, as investors sought to hedge against potential disruptions in financial markets.
Outlook: Will Gold Sustain Its Momentum?
Looking ahead, gold’s trajectory will likely remain tied to macroeconomic developments, particularly monetary policy decisions by major central banks. Any further weakness in the U.S. dollar, combined with persistent geopolitical risks and lower interest rates, could provide continued support for gold prices in the near term. Additionally, if ETF demand remains strong, gold may see further upward pressure, with the potential to set new record highs in the coming months.
However, potential headwinds include a stronger-than-expected economic recovery, which could prompt a shift away from safe-haven assets, as well as any hawkish signals from the Federal Reserve that might boost bond yields and weigh on gold’s appeal.
For now, gold continues to ride a wave of uncertainty-driven demand, reinforcing its status as a key asset in times of market volatility.
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