Gold prices inched up on Tuesday, hovering near the record highs established last week. The price of spot gold, which reflects immediate transactions, climbed 0.2% to $2,387.11 per ounce by 0355 GMT. This follows a record-breaking price of $2,431.29 per ounce set on Friday. Similarly, US gold futures, which represent contracts for future gold deliveries, rose 0.9% to $2,403.90.
Several factors are contributing to the bullish gold market. A weaker US dollar is one significant contributor. The dollar's depreciation makes gold a more attractive investment for those holding other currencies, as it translates to lower purchasing costs. The dollar's weakness stems from investor expectations regarding the Federal Reserve's monetary policy tightening plans. While an upcoming Fed meeting might cause a temporary dip in gold's appeal, analysts anticipate the central bank nearing the end of its interest rate hike cycle. This could lead to a decrease in real yields, which is the interest rate after accounting for inflation. Lower interest rates tend to elevate the appeal of non-interest-bearing assets like gold, as they diminish the opportunity cost of holding them compared to interest-bearing investments.
Geopolitical tensions also continue to bolster gold's safe-haven status. Investors often flock to gold during periods of international uncertainty, seeking its perceived stability and reliability. The ongoing conflict in the Middle East is a prime example of such tensions that tend to buoy gold prices.
Looking ahead, investor sentiment regarding the global economic slowdown and potential risk-off events will likely continue to influence gold prices. The recent weak economic data from China has cast a shadow over global growth prospects. This, coupled with concerns about inflation, could lead investors to seek refuge in gold as a hedge against economic turmoil.
Central bank activity will be another key factor to watch. The European Central Bank (ECB) and the Bank of England (BOE) are anticipated to pursue more aggressive rate hikes in their efforts to combat inflation. This could potentially strengthen their respective currencies against the US dollar, impacting gold prices. However, analysts predict that even if the dollar strengthens somewhat, gold's overall uptrend is likely to persist in the near future, supported by the aforementioned factors.