Gold prices hit new record high as geopolitical tensions rise

Gold prices surged $3,000 to $3,038 per ounce per ounce on Tuesday, their highest level in history, on rising geopolitical tensions. If gold prices rise, they may encounter resistance at the psychological level of $3,050 per ounce, while if gold prices decline, support may be encountered near $2,880 per ounce. 

Gold prices reached a new all-time high of $3,038 per ounce on Tuesday, on rising geopolitical tensions, and are likely to touch new historical highs in the following days.

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. 

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 edged lower on Tuesday ahead of the Fed policy meeting on Wednesday and the dollar index dropped from 103.4 to 103.2. US treasury yields declined, with the US 10-year bond yield falling from 4.31% to 4.29%.

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. 

Gold prices are supported by rising Fed rate cut expectations. The US Federal Reserve held interest rates steady at its January meeting after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50%. 

Market odds of rate cuts within the year are on the rise, putting pressure on US treasury yields and boosting gold prices. Fed rate cut expectations rose after the release of the US inflation report last week. The Fed, however, is widely expected to keep interest rates steady at this week’s policy meeting on the 19th. 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. This week markets will focus on the Fed’s ‘dot plot’, which is a summary of the central bank’s economic projections and reflects the Fed rate outlook.

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Written by:
Myrsini Giannouli

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