Gold breaks records, driven by geopolitical tensions
In a remarkable development for precious metals markets, gold prices surged to an unprecedented level, surpassing $4,700 an ounce for the first time during trading on Tuesday. This meteoric rise comes amid a surge in investor demand for safe-haven assets, driven by escalating trade and political tensions on the global stage. Gold wasn't alone in this rally; silver prices also moved closer to record highs, reflecting the prevailing anxiety and uncertainty in financial markets.
During trading, spot gold rose 1.2% to $4,726.86 an ounce, after hitting a record high of $4,737.10 earlier in the session. U.S. gold futures for February delivery also climbed 3% to settle at $4,732.60 an ounce, a clear indication of strong buying momentum.
Historical context: Why do investors turn to gold?
Throughout history, gold has established itself as a store of value, particularly during times of crisis. In times of war, economic recession, and currency fluctuations, the precious metal proves its resilience and ability to retain its purchasing power. This is due to its status as a tangible asset, not subject to the control of any government or central bank, granting it unique independence. The current surge in demand is not a new phenomenon; rather, it is a repetition of historical scenarios where capital has sought refuge in gold whenever uncertainty has increased, from global financial crises to major geopolitical tensions.
Direct causes and the impact of global policies
The final spark that ignited this surge came from US President Donald Trump's threats to impose escalating tariffs on eight European countries unless the US is allowed to purchase Greenland. This threat revived fears of a new trade war, which could slow global economic growth. In this context, Giovanni Staunovo, a commodities analyst at UBS, explains that "concerns about slowing growth stemming from the tariff threats, coupled with Trump's desire to lower US interest rates, are the main drivers that have propelled gold to new record highs.".
The monetary policy of central banks, particularly the US Federal Reserve, plays a pivotal role. Low interest rates reduce the opportunity cost of holding gold, which does not generate returns, thus increasing its appeal. Furthermore, the continued purchase of gold by central banks worldwide and their diversification of reserves away from the US dollar provide strong and sustainable support for prices in the long term.
Silver and other metals: A look at the broader market
The gains weren't limited to gold; silver rose 0.7% to $95.308 an ounce. Silver benefits from being both a safe haven and an industrial metal, used in many vital industries such as solar energy and electronics. This dual role, coupled with its classification as a critical metal in the United States and a structural market deficit, explains its strong performance. In other precious metals markets, platinum rose 1%, while palladium climbed 0.9%, confirming that the rally extended across the precious metals sector as a whole.
