Ongoing political tensions in the Middle East, sustained buying by central banks, weakening dollar are expected to bolster demand for gold as a safe haven and a hedge against political and economic instability.

Gold has climbed approximately 12 per cent this year, navigating through an environment of high inflation and uncertainty regarding the timing of the US Fed’s rate cuts. This resilience highlights gold’s enduring appeal as a hedge against economic instability.

Alex Ebkarian, COO and co-founder of Allegiance Gold, says gold shot higher and beyond record highs due to a confluence of economic and geopolitical issues like rising inflation, a weakening dollar and ongoing geopolitical tensions.

"Central banks, led by BRICS Plus nations, are buying gold at a faster pace and faster rate each month. We are seeing more investments led by central banks in gold as opposed to US. treasuries," Ebkarian says.

In sum, the gold market remains at the mercy of fluctuating US economic indicators, Federal Reserve policy shifts, and global geopolitical events, each capable of significantly swaying the price of gold in the short to medium term, precious metals analysts say.

Mohamed Hashad, chief market strategist, Noor Capital, said gold prices have recently surged to historical levels, mainly capitalizing on several factors that have come to the forefront, including its prestigious status as a trusted haven.

The Federal Reserve’s decisions, including interest rate adjustments and asset repurchasing policies, play a pivotal role in influencing the gold market. Notably, the recent statements by Fed Chair Jerome Powell have further fuelled the upward trend in gold prices. The interplay between monetary policy and gold remains a critical factor, says Hashad.

Michael Ashley Schulman, partner at Running Point Capital Advisors, said if the Federal Reserve decides to lower rates, as anticipated by many analysts, the dollar might weaken, potentially leading to an increase in the relative value of gold. Lower interest rates also enhance the attractiveness of non-interest-bearing assets like gold.

"In other words, gold may be on an uptrend and hitting new highs partially based on speculation that the Fed will lower interest rates and the dollar will weaken," Schulman says.

“There is a state of optimism in the markets regarding the future path of the precious metal due to the availability of many factors and incentives available in the markets, most notably in the recent period the noticeable increase in the levels of gold reserves purchased by central banks around the world. There are expectations of further rise in the coming period, which means the extension of the strong upward wave to unprecedented levels that astonished the markets. It is quite interesting that the current rise comes in the face of major challenges represented by strong incentives for the decline, most notably the strength that the US dollar enjoys at the current stage,” says Hashad.

Central banks’ purchases of gold have recently witnessed a significant increase, seeking a safe haven and a hedge against market fluctuations amid severe tensions that continue to escalate in the Middle East region, he said.

China added 160,000 ounces to the strategic reserve of gold – as part of moves to diversify foreign exchange reserves – last March, which highlights the increase for the 17th consecutive month in Chinese gold reserves, which comes amid a state of weakness that dominates the performance of the Chinese yuan, said Hashad.

According to analysts, the price of gold has soared to new heights in 2024, with gold futures surging 14.49 per cent since January 2, 2024. Gold's price per ounce also hit a new all-time high recently following several peaks. In early March, the price punched through to $2,160 per ounce — then a record high. Since then, the price has continued its upward trend, climbing toward its current price of $2,346.33 per ounce as of April 15.

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