On January 31, 2025, gold prices captivated global investors during the European trading session, exhibiting an impressive surge that saw spot gold break through the $2800 barrierFor a fleeting moment, the price reached a historic high of $2801.01 per ounce, electrifying the market with this remarkable milestoneAs of the time of writing, spot gold stood at $2791.36, reflecting a nearly 6.5% increase for the month, and is on track to record its best monthly performance since April 2024. A glance back to March of the previous year shows gold having climbed by 9.29%, underscoring the current bullish sentiment surrounding the gold market recently.
In contrast, U.S. gold futures experienced a slight decline within the trading day, now quoted at $2843.7 per ounceJust yesterday, these futures rocketed to a historical peak of $2859.5, but today’s proceedings indicated a resistance at this new high, leading to an oscillating market that mirrors the anxieties of investors.
Analysts from various media outlets have delved into the factors propelling gold prices upwards, pinpointing escalating investor concerns over U.S. tariff policies as a primary catalystIn an era defined by global economic integration, fluctuations in tariff policies can reverberate much like a stone thrown into a calm lake, triggering a ripple effect of concernThe U.S. administration announced intentions to impose a 25% tariff on imports from Mexico and Canada, effective February 1. This news has infused the market with uncertainty, prompting investors to flock to safe-haven assets—gold being the quintessential choiceInvestors harbor worries that the enactment of tariffs may escalate global trade tensions, negatively impacting economic growth
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Gold’s standing as a traditional safe-haven asset naturally positions it as a "harbor" for wealth preservation amid these turbulent times.
There are also rising concerns surrounding the potential erosion of U.S. finances due to recent tax cuts and changing immigration policies, which could reignite inflationary pressuresTax cuts might diminish governmental revenue, while alterations in immigration policies could affect labor markets and consumer spendingThe confluence of these factors serves to heighten economic uncertaintyFederal Reserve Chairman Jerome Powell stated that the central bank remains in a "wait-and-see" mode regarding the potential impact of these new governmental policiesPowell stressed that there is no immediate need for the Fed to adjust its monetary stance, affirming that current monetary policies are effectively equipped to meet forthcoming challengesThe favored gauge of inflation for the Fed—the Personal Consumption Expenditures (PCE) price index—was set to be released just one hour before the stock market opened, a data point that is keenly anticipated and could guide the expectations surrounding Fed interest rates.
Market strategist Yeap Jun Rong from IG commented, "The recurring threats of tariffs have stoked inflows of safe-haven funds into gold; any downward surprises in inflation readings could imply greater policy flexibility from the FedThis could lead to expectations for rate cuts, thereby providing further support for gold prices." Should expectations for a rate reduction be bolstered, it would imply a diminished opportunity cost of holding gold, while anticipations of currency depreciation would enhance gold's value as a preserver of wealth, thereby propelling prices higher.
Analysts at Goldman Sachs conveyed their insights, reiterating that underpinned by structural (central bank purchases) and cyclical (ETF purchases) factors, maintaining long positions in gold remains among their most confident trading recommendations within the commodities space
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