Gold breaks records, driven by global tensions
Precious metals markets witnessed a historic surge on Thursday, with gold breaking its record price again and nearing the $5,600 per ounce mark, while silver surpassed $120. This meteoric rise comes amid increased investor demand for safe havens as a hedge against escalating risks on the international stage and worrying economic indicators in the United States.
Gold prices rose 2.2% in spot trading to $5,516.71 per ounce by 09:47 GMT, after hitting a new all-time high of $5,594.82 earlier in the session. This marks the ninth consecutive record high for the precious metal, putting it on track for an exceptional monthly gain of nearly 28%.
Background to the rise: A combination of geopolitical and economic factors
This strong performance of gold stems from a historical context in which the precious metal has consistently proven its ability to serve as a safe haven for value. In times of uncertainty, whether caused by political conflicts or economic turmoil, investors and central banks turn to gold to preserve their wealth. The price of gold has risen by more than 27% since the beginning of the year, fueled by geopolitical tensions between the United States and Iran, the weakening US dollar, and market expectations of more accommodative monetary policies from the Federal Reserve.
In this regard, Jamie Dutta, a market analyst at Nemo.money, said that "the perfect storm for gold is still unfolding," noting that the weak dollar and expectations of interest rate cuts are driving prices to consecutive record highs. Strong inflows into gold-backed exchange-traded funds (ETFs) have also contributed to this surge, with the SPDR Gold Trust, the world's largest specialized fund, reporting its holdings at their highest level since May 2022.
The impact of monetary policy and the weakening dollar
On the economic front, investors are awaiting the Federal Reserve's interest rate decisions. While the Fed kept rates unchanged at its last meeting, expectations point to a possible rate cut in June, which would reduce the opportunity cost of holding gold, a non-yielding asset. Furthermore, the US dollar continues its weak performance, having fallen to its lowest level in four years, increasing the appeal of gold for investors holding other currencies.
Silver and other metals are following suit
The gains weren't limited to gold; silver also rose, climbing 0.7% in spot trading to $117.42 an ounce, after hitting a record high of $120.45. Silver has gained nearly 64% since the start of the year, benefiting from its dual role as a safe haven and a vital industrial metal. As for other precious metals, platinum rose 1.8% to $2,743.80 an ounce, while palladium dipped slightly by 0.2% to $2,070 an ounce.
