- Ahead of key economic events, gold prices rose to as high as $2288 an ounce, setting new all-time highs.
- Geopolitical tensions and rising demand from funds and central banks offset a strong dollar and the possibility of higher US interest rates for longer.
- Overall, gold prices have gained 10.5% since the start of the year.
Over the past 12 months, the yellow metal has risen by more than 15%. Silver prices, gold's sister commodity, also joined the rally yesterday. Silver futures rose to $26.055 an ounce. Overall, white metal has risen by almost 9% since the start of the year to date.
Meanwhile, geopolitical tensions escalated this week after an Israeli attack on the Iranian embassy in Syria killed two generals and Ukraine launched a raid on a refinery deep inside Russian territory. At the same time, the rising value of gold has been attracting individual investors. Moreover, this comes in light of recent economic data that suggests the US economy remains strong, giving the Federal Reserve additional room to keep US interest rates higher for an extended period. Overall, focus will now shift to the US jobs report for March on Friday and comments from several Federal Reserve officials for more clarity on the US easing cycle.
What are the reasons for the rise in gold prices to record levels?
First, the US dollar index (DXY), a measure of the US currency against a basket of currencies, fell 0.2% to 104.82. A weaker dollar is beneficial for dollar-denominated commodities as it makes them cheaper to buy for foreign investors.
Second, Treasury yields were mixed, with the 10-year yield topping 4.36%. The 2-year yield fell below 4.7%, while the 30-year yield fell to around 4.51%. As is well known, gold is sensitive to fluctuations in interest rates as it affects the opportunity cost of holding the non-yielding bullion.
At the same time, the futures market is pricing in a 70% chance of a rate cut at the Federal Open Market Committee (FOMC) policy meeting in June. At the same time, with two consecutive months of hotter-than-expected inflation data, a group of economists argue that the gold price is rising because it suggests the central bank may reignite inflation threats. Also, geopolitical tensions are playing a role in the gold surge. "We are seeing some safe-haven demand flowing into gold, which is related to the Israeli strikes on the Iranian embassy in Syria," Daniel Ghali, a commodity analyst at TD Securities, told CNBC.
On the other hand, US stock indexes closed lower on Tuesday as investors scaled back expectations that the US Federal Reserve will ease monetary policy in June, after new data continued to show that the US economy remains strong. According to stock trading platforms, the S&P 500 fell 0.7%, the Dow Jones fell 396 points, and the Nasdaq fell 0.9%. Furthermore, February saw US job openings rise by 8,000 to 8.756 million, slightly above expectations of 8.75 million. In addition, US factory orders beat expectations, echoing the ISM manufacturing report released the previous day, which pointed to growth after 18 months of decline.
Gold Price Forecast and Analysis Today:
The overall trend for the price of gold remains bullish and is gaining strength, with investors paying little heed to technical indicators pointing towards strong buying saturation levels. Instead, they are focusing on recent gold gains factors. Currently, the $2300 resistance level per ounce will remain an easy target for bulls if global geopolitical tensions increase, pressure on the dollar continues, and purchases of gold by central banks and individuals increase.
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