A vendor shows various models and weights of silver bullion at a gold jewellery manufacturer in “El Sagha”, as gold prices recorded an increase after a devaluation of the local currency, at the gold market area in Cairo, Egypt January 14, 2024.
Amr Abdallah Dalsh | Reuters
Gold advanced to a new record high near the $5,600-an-ounce level on Thursday, as investors sought refuge from escalating geopolitical tensions and weakening economic signals in the United States.
Silver also benefited from the flight to safety, leaping above the $120 level.
Spot gold rose 2.2% to $5,516.71 an ounce by 0947 GMT, after hitting a record $5,594.82 earlier in the day. The metal, which has hit record highs for nine straight sessions, was set for a 28% rise for the month so far.
U.S. gold futures for February delivery jumped 4% to $5,509.60 after hitting an all-time high of $5,626.80 earlier.
Bullion has gained more than 27% so far this year as policy uncertainty in the United States, coupled with elevated geopolitical tensions and economic uncertainty, have prompted investors to seek safety in the yellow metal. “Gold’s perfect storm continues with U.S.-Iran geopolitical tensions, a weak dollar and market expectations of more Fed rate cuts driving prices to endless record highs,” said Jamie Dutta, market analyst at Nemo.money, adding that strong ETF inflows have also contributed to the rally.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings on Wednesday rose to 35,043,181 ounces, its highest since May 2022.
On the geopolitical front, Trump pressed Iran on Wednesday to negotiate a nuclear deal, warning that the U.S. would respond more forcefully than it did in last year’s attack on Iranian nuclear facilities.
Tehran responded by threatening retaliatory action against the U.S., Israel, and their allies.
On the policy front, the U.S. Federal Reserve held rates steady on Wednesday, with investors now looking forward to Trump’s announcement of the new Fed chair, and are expecting the next interest rate cut to be in June.
The U.S. dollar remained on shaky ground, after it hit a four-year low on Tuesday following Trump’s comments brushing off its recent weakness. A weaker dollar makes greenback-priced bullion more attractive to overseas buyer.
Against an uncertain geopolitical and economic backdrop, “further gains are possible for (gold) which could rise above the $6,000 level and, after a period of consolidation, move towards $7,000 by year-end,” said ActivTrades analyst Ricardo Evangelista.
Among other precious metals, spot silver was up 0.7% at $117.42 an ounce after hitting a record high of $120.45 earlier. The white metal has gained nearly 64% so far this year as investors look to diversify out of gold, with persisting supply deficits and momentum buying providing further support. “Silver’s squeeze means $130 is in sight with long-term industrial demand underpinning support,” Dutta added.