By Linh Tran
Gold prices ended yesterday’s trading session near $3,000 per ounce, and this morning, the precious metal temporarily set a historic high of $3,015 per ounce. This surge was driven by the weakening U.S. dollar and escalating geopolitical tensions in the Middle East, making gold an attractive asset for investors.
The U.S. dollar continues to face downward pressure as the DXY – which measures the greenback’s strength against a basket of major currencies – dropped to 102.85 yesterday due to weak economic data.
Specifically, U.S. retail sales in February fell below expectations, while the Empire State Manufacturing Index, a key indicator of manufacturing activity in New York, declined to its lowest level in 14 months. These figures have raised concerns about the pace of U.S. economic growth, leading to a weaker dollar and providing further momentum for gold prices.
Another factor contributing to gold’s rally is the growing burden of U.S. public debt. Currently, U.S. federal debt has surpassed $34 trillion, sparking market concerns over the government’s financial management. Rising interest costs are becoming a significant burden, increasing financial risks.
Amid this backdrop, gold is viewed as a “safe-haven” asset that helps preserve value against economic and financial uncertainties. This has fueled demand for the precious metal, particularly from major financial institutions, reinforcing gold’s strong position in global investment portfolios.
Geopolitical tensions in the Middle East continue to escalate, with conflicts showing no signs of de-escalation. Yesterday, the Israel-Hamas conflict intensified dramatically as Israel launched large-scale airstrikes on Gaza, resulting in at least 200 casualties, including many children, women, and the elderly.
These tensions, combined with the escalating U.S.-China trade conflict, have driven investors toward gold as a safe investment channel. These uncertainties have not only increased demand for gold but have also pushed significant capital inflows into the precious metals market, contributing to gold reaching record-high prices.
Currently, the global financial market’s focus is on the upcoming monetary policy meeting of the Federal Open Market Committee (FOMC). According to the CME Group’s FedWatch tool, the Fed is likely to keep interest rates unchanged at 4.25% – 4.50% in this meeting. However, investors are closely monitoring any signals regarding the future direction of monetary policy.
If the Fed adopts a more dovish stance, this could further propel gold prices in the coming weeks. A looser monetary policy from the Fed would weaken the U.S. dollar even more while encouraging investors to turn to gold as a hedge against risk.
Tran is Market Analyst at XS.com
