Gold prices soared past $5,300 per ounce on Wednesday, marking a significant milestone as the precious metal reached unprecedented heights amid a notable decline in the U.S. dollar, which hit a near four-year low. This surge in gold prices is largely attributed to persistent geopolitical tensions and waning confidence in the stability of the U.S. dollar, which has made gold increasingly appealing as a safe-haven investment.
By 0940 GMT, spot gold had climbed to $5,275.68 an ounce, a 1.7% increase, following a record peak of $5,311.31 earlier in the day. In addition, U.S. gold futures for February delivery experienced a robust 3.7% rise, reaching $5,271.70 an ounce. This follows a previous session where gold prices had already gained more than 3%.
Linh Tran, a senior market analyst at XS.com, emphasized that the rising gold prices stem not only from market anxieties but also from a shifting confidence in the global monetary and fiscal landscape, prompting investors to adopt a more cautious approach.
The U.S. dollar’s struggles were further compounded by President Donald Trump’s dismissal of concerns surrounding its recent downturn. This situation has rendered dollar-priced gold more attractive for international buyers. Trump’s remarks included an imminent announcement regarding his pick for the next head of the Federal Reserve, alongside a prediction that interest rates will decline with the new appointment. Analysts believe that the potential candidates for the Fed position might be more amenable to Trump’s demands than the current chair, Jerome Powell, which could further bolster gold’s appeal.
Historically, gold has performed well in low-interest-rate environments, as it does not yield any interest itself. The market anticipates that the Federal Reserve will maintain steady rates during its upcoming January monetary policy meeting. Year-to-date, gold has experienced a remarkable increase of over 20%, building on its record gains from the previous year. Deutsche Bank analysts project that gold could surge to $6,000 per ounce this year due to continuing robust investment demand.
Retail demand for gold remains strong, particularly in major markets like Shanghai and Hong Kong, even in the face of soaring prices. However, some market observers, including WisdomTree commodities strategist Nitesh Shah, speculate that high prices might dampen jewellery demand while simultaneously encouraging speculative investments from retail buyers. Shah noted the dual nature of the market dynamics, where elevated prices could create challenges on the jewellery front but simultaneously fuel interest among investors seeking safe-haven assets.
