Gold prices have reached record highs recently, with investors pouring money into this safe haven asset amid rising global political uncertainty.
Gold surged past the $5,000 per ounce mark for the first time on Monday and briefly hit $5,500, although it experienced a slight decline in subsequent days.
In addition to gold, silver has also rallied and is currently trading around $98 per ounce, a significant increase from $35 per ounce a year ago. Despite recent price fluctuations, gold continues to provide a refuge for investors amid ongoing geopolitical tensions.
Trump Uncertainty Shifting Investment
Global trade has taken a hit due to tariffs imposed by US President Donald Trump on nations he views unfavorably in trade negotiations.
Emma Wall, chief investment strategist at Hargreaves Lansdown, noted that Trump's trade policies are causing concerns among investors, further driving the gold rally.
In January, both gold and silver prices reached record highs while share prices fell in response to Trump's threat of new tariffs against eight European countries opposed to his proposition regarding Greenland.
Capital Economics economist Hamad Hussain explained that the perception of gold as a safe investment, contrasting with the risks tied to US fiscal and foreign policies under Trump, has positioned the metal in high demand.
War and Greenland Threats Add to Uncertainty
Conflicts in Ukraine and Gaza have intensified a general atmosphere of political uncertainty, pushing gold prices to new heights. The US's aggressive stance towards countries like Venezuela has also influenced market activities.
Trump's Greenland threats escalated global political tensions, leading to a drop in confidence in the US dollar, as investors turned to precious metals for stability. Compared to previous years, many central banks are now favoring gold, seeing it as a more reliable reserve currency.
Gold behaves as expected in turbulent times, gaining value amid rising geopolitical tensions and trade conflicts, Wall stated.
Central Bank Buying
The ongoing purchases of gold by central banks worldwide have proven pivotal in driving up its price. Wall highlighted that nations are increasingly seeking to protect themselves from US policy fluctuations, reinforcing gold's appeal.
Though central bank demand has increased since 2022, Hussain mentioned that estimates suggest a softening in demand during 2025. Notably, China stands out as a major purchaser of gold, driven by jewelry demand and investment.
The growing presence of new buyers, including Tether, a digital currency specialist, has significantly influenced the gold market, as these entities accumulate substantial reserves.
Why Has the Price of Gold and Silver Fallen in Recent Days?
Gold experienced a remarkable rally in early days of the week, prompted by fears of Trump appointing a Federal Reserve chairman who would yield to his advice on lowering interest rates, consequently diminishing the dollar and leading to inflation. However, as reports circulated about a more moderate candidate, Kevin Warsh, being nominated, upward pressure on gold prices alleviated.
The fluctuations indicate that while gold remains a precious asset during turbulent times, its value can also dip rapidly when market conditions shift unexpectedly.
