Gold prices are at all-time highs, crossing $3,490 per ounce briefly and returning to settle in around this amount. This dramatic increase represents a new high-water mark for the colored metal’s worth. It points to a larger trend of increasing demand in the face of global economic headwinds.
In just the past week, gold prices have increased 5.7%, and for the month they are up a remarkable 14.2%. Gold has skyrocketed almost 31% YTD. That astounding jump is fueled by a combination of geopolitical turmoil and a tightening monetary policy. Analysts are pointing to increased safe-haven demand as a leading cause of this rally, with investors looking for stability in volatile markets.
The current surge in gold prices is primarily caused by former President Donald Trump’s deepening attacks on the US Federal Reserve. This vocal opposition is creating a great deal of uncertainty in the market. Trump’s vocal discontent with Fed Chair Jerome Powell’s monetary policy, particularly regarding interest rates, has sparked concerns among investors. Trump has repeatedly attacked Powell for being slow to lower interest rates. He thinks that in the process, he might help to stimulate economic growth, too.
“With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW.” – Donald Trump
Besides Trump’s tweets, shifting proclamations around tariffs have fueled this soaring demand for gold. Safe haven asset Gold is the go-to investment avenue during turmoil. That view is largely driven by the US-China trade war. Ties between these two economic heavyweights are increasingly wearing thin. Consequently, investors are flocking to gold as a safe haven amidst the increasing turbulence.
The other headwind is the weaker US dollar, which has the opposite effect. Similarly, a declining dollar makes gold cheaper for foreign investors, thereby boosting its demand. Global trade tensions are at a new peak. This has made the perfect conditions for investing in safe haven assets such as gold which has ignited a surge in buying activity.
This isn’t the first time inflation fears have helped kick off a strong rally. And, yes, inflation has been coming down pretty fast. The current economic instability and market chaos is driving investors toward tangible assets such as gold. The intersection of increasing tensions with the European Union and a growing geopolitical climate have increased the call for safe investments.
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