Gold prices have breached the $2900 per ounce mark, setting a fresh record high during the Asian session on Tuesday. This upsurge is driven by heightened safe-haven demand amid looming geopolitical tensions and economic uncertainties. Market analysts are closely watching US inflation data expected this week, which could further influence gold prices. In addition, President Donald Trump's anticipated tariff order is adding to the market's volatility.
The precious metal's rally is fueled by several factors, as highlighted in the latest World Gold Council report for January. The Gold Return Attribution Model (GRAM) revealed that most factors had a positive impact on gold prices. A significant contributor to this upward trend is the sharp rise in the Geopolitical Risk Index (GPR). The announcement of new tariffs by President Trump has exacerbated these geopolitical tensions, prompting investors to seek refuge in gold.
President Trump is set to sign an order on tariffs later on Monday or Tuesday. This move follows his first term's imposition of tariffs—25% on steel and 10% on aluminum—initiated in 2017. The anticipation of further tariffs has instilled unease in global markets, pushing gold prices higher as investors hedge against potential economic repercussions.
Meanwhile, global gold ETFs have experienced a surge in activity. The total assets under management (AUM) rose to a staggering US$294 billion, with holdings climbing to 3,523 tons in January. European ETF inflows have been particularly noteworthy, reaching their highest levels in years with inflows totaling +US$3.4 billion, or 39 tons. This robust demand reflects a growing investor appetite for gold amid uncertain market conditions.
The European Central Bank's (ECB) recent rate cut further influenced the financial landscape. The decision caused bund yields to drop sharply throughout the month, reinforcing gold's appeal as a safe-haven asset. As traditional investments faced increased volatility, investors turned to gold as a reliable store of value.
Gold's performance in January was remarkable, with the precious metal recording gains of approximately 6.6%. This positive momentum followed a strong US dollar in December, which had initially tempered returns. However, the delayed impact of the dollar's strength did not deter gold's upward trajectory.
In addition to these economic and geopolitical dynamics, Ripple's partnership with Unicâmbio, a Portuguese currency exchange provider, was announced on Monday. While not directly linked to gold prices, such partnerships illustrate ongoing shifts in the financial landscape that can indirectly affect investor behavior and market sentiment.
The current upside for gold remains limited with today's high at $2911 possibly serving as resistance. Nevertheless, the broader market sentiment remains bullish as geopolitical uncertainties and economic developments continue to drive demand for this precious metal.