Bitcoin is making waves in the financial markets, hovering around the $97,000 level. Meanwhile, central banks worldwide have shown a strong preference for gold, adding 1,136 tonnes worth approximately $70 billion to their reserves in 2022. This surge in gold accumulation coincides with the evolving economic policies of the Trump administration. President Trump has recently announced the imposition of tariffs on several of America's trading partners, further impacting global economic dynamics.
The US 10-year Treasury bond yield has seen a significant drop, decreasing five basis points to 4.48%. Similarly, US real yields, which have an inverse relationship with bullion prices, have dipped by four basis points to 2.041%. This has provided a favorable environment for gold investors, as central banks continue their purchasing spree. For the third consecutive year in 2024, central banks acquired over 1,000 tonnes of gold. Following Trump's electoral victory, central bank gold purchases surged by more than 54% year-over-year to 333 tonnes.
As the US 10-year T-note yield dropped by six basis points to 4.472%, gold's upward trend persisted despite a brief retracement. The precious metal reached a two-day low of $2,878 but remained buoyant in the market. The Relative Strength Index (RSI) exited from overbought territory after dominating most of February, encouraging investors who have already anticipated more than one interest rate cut by the Federal Reserve.
Emerging economies such as China, India, and Turkey have been quick to bolster their gold reserves, contributing to the overall trend of increased gold purchases by central banks globally. The US Dollar's influence on gold prices remains significant; while a strong Dollar tends to keep gold prices controlled, a weaker Dollar is likely to push them upward. Despite falling below $2,900 on Friday, gold is poised to end the week with solid gains exceeding 0.80%.
The ascent of Bitcoin to nearly $97,000 marks a remarkable milestone in the cryptocurrency domain. Investors are closely monitoring its performance as it approaches this psychological barrier. Bitcoin's growth reflects the broader acceptance and integration of digital currencies into mainstream financial systems.
Simultaneously, President Trump's economic policies are reshaping international trade relations. The newly imposed tariffs have sparked reactions from America's trading partners, adding layers of complexity to global commerce. These measures are part of a larger strategy by the Trump administration to recalibrate trade agreements and bolster domestic industries.
Central banks' renewed interest in gold underscores its enduring appeal as a safe-haven asset amid economic uncertainties. In 2022 alone, they added 1,136 tonnes to their reserves, valued at approximately $70 billion. This trend continued vigorously in 2024, with purchases exceeding 1,000 tonnes for the third consecutive year.
Furthermore, central banks ramped up their gold acquisitions by more than 54% year-over-year in response to Trump's electoral victory. This increase highlights gold's role as a hedge against geopolitical risks and potential currency fluctuations.
The drop in US Treasury yields further supports the case for investing in gold. As yields fall, the opportunity cost of holding non-yielding assets like gold diminishes, making it an attractive option for investors seeking stability. The decline of five basis points in the 10-year Treasury bond yield and six basis points in the T-note yield aligns with this narrative.
The relative strength of the US Dollar also influences gold prices significantly. While a strong Dollar can suppress gold prices by making it more expensive for foreign investors, a weaker Dollar tends to lift them upward. Recent market movements suggest that investors are pricing in possible interest rate cuts by the Federal Reserve, which could weaken the Dollar and benefit gold.
Emerging economies are playing a crucial role in this global shift toward increased gold reserves. Countries such as China, India, and Turkey are rapidly expanding their holdings as part of broader strategies to diversify their reserves and reduce reliance on traditional fiat currencies.