Gold prices continued their strong upward trajectory, reaching new record highs and surpassing the $4,800 per ounce mark on Wednesday. This significant rise is driven by a surge in demand for safe-haven assets amid escalating geopolitical tensions between the United States and NATO over Greenland, as well as a weakening US dollar in global markets.
General context and the importance of gold as a safe haven
Historically, gold has been a key hedge for investors during times of economic and political uncertainty. In times of crisis, investors tend to withdraw their investments from high-risk assets like stocks and turn to the precious metal to preserve the value of their capital. This is due to gold's intrinsic value and relative stability compared to paper currencies, which are affected by inflation rates and central bank monetary policies. The current tensions surrounding Greenland provide a perfect example of geopolitical risk driving investors to seek safety in gold.
Greenland: Strategic and Economic Importance
Greenland, the world's largest island and a territory of Denmark, is gaining increasing strategic importance for major global powers. Its Arctic location makes it a pivotal point in new shipping lanes emerging with the melting ice, in addition to its military significance. Economically, Greenland is believed to possess vast reserves of natural resources and rare minerals, which are vital to advanced technology and defense industries. The United States has a long history of interest in the island, most notably former President Donald Trump's attempt to purchase it in 2019, highlighting its strategic value and the potential for it to become a source of international conflict.
Details of price movements and the impact of the dollar
In trading details, spot gold rose 2.1% to $4,861.91 an ounce by 11:52 GMT. U.S. gold futures (February delivery) also climbed 2.1% to $4,864.80 an ounce. Meanwhile, the dollar index held near its lowest level in two weeks, making gold cheaper for holders of other currencies and increasing its appeal. John Meyer, an analyst at SP Angle, said, “We expect gold to break above $5,000 an ounce as investors continue to seek safe, inflation-resistant assets.”.
Performance of other precious metals
The positive momentum wasn't limited to gold alone, as other precious metals also saw notable movements. Silver rose 0.2% to $94.71 an ounce, after hitting a record high of $95.87 on Tuesday. Platinum also climbed 0.1% to $2,464.79 an ounce, while palladium edged down 0.6% to $1,854.35, after touching its highest level in a week.
