Gold Prices Edge Closer to All-Time High Amid Fed Speculation and Global Tensions

Bullion Nears Record Levels as Investors Seek Safety in Uncertain Times

Mar 5, 2024 - 08:12
Mar 5, 2024 - 08:13
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Gold Prices Edge Closer to All-Time High Amid Fed Speculation and Global Tensions
Gold Prices Edge Closer to All-Time High Amid Fed Speculation and Global Tensions

Gold prices are on the rise, inching closer to their all-time peak, driven by speculation surrounding the Federal Reserve's actions and escalating geopolitical tensions worldwide. The precious metal surged by nearly 0.6% to hit $2,127.37 per ounce, approaching the previous record of $2,135.39 achieved in December last year.

Over the past five trading sessions, gold has experienced a remarkable climb of nearly $100, fueled by concerns over international events, expectations of central bank interventions, and anxieties about volatility in stock markets. Some market analysts express surprise at the magnitude of this recent surge, attributing it in part to the momentum it has gathered.

Worries about a potential downturn in equities, emphasized by disappointing US manufacturing data released last Friday, may have prompted some investors to shift their assets from stocks to gold, suggests Ole Hansen, a market analyst at Saxo Bank A/S.

While the exact timing of the Federal Reserve's policy adjustment remains uncertain, indications pointing towards its approach have been bolstering gold prices since mid-February. Futures markets indicate a roughly 60% chance of a rate cut occurring in June, a figure higher than that observed earlier last month. Lower interest rates typically bode well for gold, which does not offer any interest payments.

However, skepticism exists among certain analysts regarding the sustainability of gold's recent ascent.

"We believe that the rally is fragile," remarks Thu Lan Nguyen, head of commodity research at Commerzbank AG. "We wouldn't be surprised to witness a minor pullback in the coming days due to profit-taking."

The role of gold as a safe-haven asset is underscored by mounting geopolitical tensions, exemplified by recent attacks on ships in the Red Sea, signaling escalating tensions in the Middle East. Additionally, uncertainties surrounding China's economic trajectory and the upcoming US presidential election later this year contribute to an environment ripe for market volatility.

At 10:54 a.m. in London, the price of spot gold was up by 0.5% at $2,123.84 per ounce. The Bloomberg Dollar Spot Index remained stable, while silver prices showed minimal fluctuations. Platinum and palladium prices experienced slight declines amid the prevailing market conditions.

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