Gold prices rise to historical highs

Gold prices rose to a historical high of $3,057 per ounce on Thursday but lost their bullish momentum later in the day, trading below $3,050 per ounce. If gold prices rise, they may encounter resistance at the psychological level of $3,100 per ounce, while if gold prices decline, support may be encountered near $2,905 per ounce. 

Gold prices reached a new all-time high of $3,057 per ounce on Thursday and are likely to touch new historical highs in the following days.

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar rallied on Thursday, and the index rose from 103.5 to 103.8. US treasury yields remained steady, with the US 10-year bond yielding approximately 4.24%.

Gold prices are supported by rising Fed rate cut expectations. The US Federal Reserve kept interest rates unchanged at its policy meeting on Wednesday. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50%. Policymakers remained cautious and kept interest rates steady under a climate of economic and inflationary statements. 

The Fed, however, updated its ‘dot plot’, which is a summary of the central bank’s economic projections and reflects the central bank’s rate outlook. The latest FOMC dot plot indicated that FOMC members expect interest rates to reach a median value of 3.9% in 2025. This suggests that policymakers expect to deliver approximately two more rate cuts this year of 25 basis points each, raising market expectations of future rate cuts. Markets are pricing in two more rate cuts this year, with the first rate cut in June, while a third rate cut is also considered possible. 

Fed Chair Jerome Powell delivered a hawkish message after the policy meeting, stating that the central bank is not in a hurry to lower interest rates. Powell cited economic instability and elevated inflation risks due to trade tariffs as the reasons behind the Fed’s decision to keep interest rates steady.

Hostilities in the Gaza area were resumed this week, breaking the ceasefire deal between Israel and Hamas. Israel launched an airstrike in the Gaza area, killing more than 400 people and breaking the ceasefire deal. The Israeli government threatened that there was more to come, shuttering the peace in the region and propelling gold prices upward. Meanwhile, Russian President Vladimir Putin agreed to pause attacks on Ukraine’s energy infrastructure for 30 days but has so far not accepted a full ceasefire against Ukraine. 

Uncertainty over US President Donald Trump’s future policies and trade tariffs promotes a risk aversion sentiment. Concerns that Trump’s trade policies may ignite global trading wars are raising the appeal of safe-haven assets, such as gold. Trump’s tariffs are likely to raise global inflation and lower the economic outlook, thus promoting a risk aversion sentiment that boosts safe-haven assets. Trump’s economic policies are raising concerns that the US economic growth may slow down. Many analysts are already expressing concerns that the US will enter a recession.

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Written by:
Myrsini Giannouli

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