Gold crosses $2,700 for first time: What’s fueling the surge in yellow metal?

Gold prices have skyrocketed beyond the $2,700 threshold for the first time, propelled by expectations of further monetary easing and heightened safe-haven demand amid geopolitical uncertainties surrounding the US presidential elections and ongoing Middle East conflicts.

As of Friday, spot gold climbed 0.6% to reach $2,709.81 per ounce, having earlier touched an all-time high of $2,714.00.

This week alone, bullion has gained over 2%, while US gold futures increased by 0.7% to settle at $2,725.

Gold price rise due to rising geopolitical tensions

Analysts are attributing gold’s upward momentum to rising geopolitical tensions that are driving investors toward safe-haven assets.

“The markets continue to look to geopolitics, and the overnight developments in the Middle East are fueling uncertainty,” Rhona O’Connell, an analyst at StoneX told news agency Reuters.

Recent statements from Lebanon’s Hezbollah militant group and Israeli Prime Minister Benjamin Netanyahu regarding the intensifying conflict in the region have only heightened investor apprehension.

The surge in gold prices reflects a strong inclination among traders, particularly from the Asian markets.

Independent analyst Ross Norman told Reuters: “Gold’s breakthrough past the psychologically significant $2,700 mark during Asian trading hours suggests that speculative interest is peaking.”

He explained that gold is witnessing robust trading activity, seemingly indifferent to factors such as declining inflation and Treasury yields.

Gold price: further rate cuts from major central banks

With a remarkable increase of over 31% this year, gold’s rally is largely attributed to the prospect of further easing measures from major central banks, including the US Federal Reserve, alongside ongoing geopolitical tensions.

In the physical market, dealers in India have reported offering discounts due to a dip in demand, which has been affected by the record-high prices, especially ahead of a key festival.

Market analysts suggest that gold could face resistance around the $2,750 mark if it continues its ascent.

Frank Watson, a market analyst at Kinesis Money, commented, “Should gold maintain its upward trajectory, it may encounter resistance at approximately $2,750 an ounce, which aligns with the upper boundary of the rising trend channel we’ve observed since late July.”

As geopolitical tensions escalate and monetary policies remain uncertain, the allure of gold as a safe-haven asset shows no signs of waning, solidifying its position as a dominant force in the market.

Banking major ING said: “We believe the macro picture combined with safe-haven demand amid an escalation of tensions in the Middle East and the ongoing war in Ukraine will drive gold to new highs.”