Gold prices reached unprecedented levels on Tuesday, reflecting a perfect storm of escalating geopolitical tensions, increased anticipation of additional interest rate cuts by the U.S. Federal Reserve, and growing skepticism regarding the sustainability of recent market gains. By mid-session, gold futures had climbed by 0.3%, settling at $3,787.80 per ounce, while the spot price rose by 1% to $3,750.45 per troy ounce after briefly surpassing $3,759 earlier in the day.
The surge in gold prices can be attributed to its well-established role as a safe-haven asset amidst uncertainty. Factors influencing investor sentiment include ongoing conflicts in Ukraine and the Middle East, persistent inflation concerns, and political instability in the United States. Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, highlighted the geopolitical risks arising from the Gaza conflict and tensions with Russia, noting that several developed nations are increasingly recognizing Palestine—a move that strains international relations.
Concerns also linger over the potential fiscal impact of former President Donald Trump’s actions, particularly his influence on borrowing and the Federal Reserve’s policies, making gold an attractive option for cautious investors. Additionally, central banks have ramped up their gold purchases this year, seeking to diversify reserves and diminish reliance on the U.S. dollar. Analyst Kyle Rodda from capital.com pointed out that monetary policy expectations and lower interest rates are further supporting gold’s appeal in the market.
While the general outlook remains positive for gold, some experts anticipate a short-term pause in the relentless rally. Oanda’s Kelvin Wong noted that while the short-term trend is bullish, technical factors may prompt a minor pullback. Despite gold not generating income like cash or bonds, lower interest rates reduce the opportunity cost of holding the metal, attracting more investors.
In a historical context, Deutsche Bank’s Jim Reid commented on gold’s strong annual performance trajectory, noting it is on pace for its best results since 1979, driven by rising inflation and similar market dynamics to those seen during the oil crisis of that era.
Meanwhile, oil prices faced downward pressure amid news of a preliminary agreement between Iraq’s federal government and Kurdish authorities to resume crude exports through Turkey, a development that raised concerns of an oversupply in global markets. Brent crude futures dipped by 0.5%, trading at $66.23 per barrel, while West Texas Intermediate futures fell by 0.4% to $62.02 per barrel. LSEG senior analyst Anh Pham emphasized that the prevailing theme of oversupply, coupled with uncertain demand forecasts, contributed to the decline in oil prices.
Additionally, the pound held steady against major currencies as forex traders awaited crucial Purchasing Managers Index (PMI) survey results. The sterling was unchanged against the U.S. dollar, trading at $1.3512, and showed little movement against the euro at €1.1451. A stronger UK services PMI could provide limited support for the pound, although any gains may be moderated by renewed interest in the dollar. Conversely, a weaker reading could exert additional pressure on the sterling, especially following the Bank of England’s dovish outlook.
In the equities market, the FTSE 100 index was experiencing an uptick, rising by 0.3% to reach 9,251 points on Tuesday morning, as investors navigated the mixed economic signals. For continuous updates on market movements, comprehensive live coverage is available.
