Gold (XAU/USD) has soared to all-time highs. That explosion is driven by increased political polarization, economic anxiety and expectations for dovish monetary policy. That precious metal is currently enjoying huge demand as a safe haven. Investors are pouring into it, desperate to safeguard their wealth from the present chaos in international markets. Beyond late-summer 2020, gold’s price-making path had traced a clear, set-in-stone rising parallel channel, which oversaw its multi-year bull-market uptrend. Earlier this year, gold broke out of an over three-year long consolidation period. This breakout is just the beginning of a major bullish trend that will eventually turn the market’s tides.
During the most recent spike, gold’s price broke through the $2,000 threshold for the first time since its peak at $2,075 in August of 2020. Gold’s price action leading into this breakout showed $3,500 resistance was going to be a strong momentum reversal. The U.S. government shutdown currently rolling through the country is exacerbating price increases. Increased trade tensions and increased geopolitical conflicts, particularly in Ukraine, are driving that up.
Factors Driving Gold Demand
This rising demand for gold is not just random. It’s happening largely thanks to today’s volatile political climate. The danger of a U.S. government shutdown has increased global market uncertainty. Consequently, investors are rushing into gold, considering it to be a safe-haven investment. Political gridlock in Washington continues to undermine confidence in our economic prospects. Because of these reasons, investors are turning to gold for safety.
Moreover, new trade threats have stoked the flames of gold’s rise even more. Combined with President Trump’s bellicose threats to impose 100% tariffs on all imports from China, the trade dispute has reached stratospheric heights. This uncertainty changes trading patterns and increases the volatility in the markets. This makes gold an attractive asset through which investors can hedge against these losses.
The increasing crisis in Ukraine has been another important factor influencing surging gold prices. Russian military attacks on Ukrainian infrastructure and retaliatory drone strikes targeting critical facilities in Crimea are contributing to a climate of fear and instability. Such geopolitical tensions typically cause investors running to gold seeking a safe haven from unexpected global turmoil.
Technical Aspects of Gold’s Surge
As a result, Gold’s price movement has been closely following an extremely well established, perfect hitting, ascending channel since mid-2020. This channel has served as the base for a multi-year uptrend for gold. This is the best illustration we have found to show gold’s long-term direction, flexibly adapting to underlying market conditions. Gold had a false breakout above $2,000 not too long ago, indicating the beginning of a new bullish trend. This follows an unusually long consolidation period that started after its all-time high in 2020.
The breakout from that long consolidation phase has clearly set new bullish momentum into motion for gold. It cicadaɽ a very big inflection for the asset. Prices were mostly just around $3,500 leading up to the breakout. Market analysts consider this type of movement as a pretty obvious indicator of ultra bullish sentiment in the market. Technical indicators suggest that gold still has room to rise. This pattern is expected to persist as long as the current economic and political uncertainties do.
Investors are closely watching market expectations for Fed interest rate cuts. They expect at least one of these cuts to happen in October and the other by December. Dovish policy shifts from central banks typically propel gold higher, and we’ve seen a notable trend towards such shifts this spring. Lower interest rates increase the opportunity cost of holding non-yielding assets such as gold.
Global Market Implications
Looking at several of the global factors fueling the current surge in gold prices. Yet, China’s recently intensified export controls on rare earths have thrown another wrench into the highly dangerous and stormy economy. These controls and the worries they stoke make up the supply chain concerns, increasing additional demand for gold, which is an alternative investment, too.
Geopolitical risks are increasing and economic uncertainty is the new normal. Consequently, gold market analysts anticipate that gold will continue to soar. Political instability, duplicitous toccata of trade threats and trade wars, and a literal war—these American and global realities are spurring investors to find safe harbors. Consequently, gold remains a highly preferred asset amid today’s turbulent environment.