Gold prices surged to fresh record highs on Wednesday, breaking through the $5,300 an ounce mark as the US dollar hovered near four-year lows and investors sought safe-haven assets ahead of the Federal Reserve’s interest rate decision.
Spot gold jumped 1.7 per cent to $5,275.68 an ounce, after briefly touching an all-time high of $5,311.31. US February gold futures climbed even more sharply, rising 3.7 per cent to $5,271.70. The precious metal has now gained more than 20 per cent since the start of the year, reflecting mounting demand amid economic and policy uncertainty.
Market attention is firmly fixed on the Federal Reserve, which is scheduled to release its policy statement at 2:00 p.m. Eastern Time on Wednesday, followed by a press conference by Chair Jerome Powell at 2:30 p.m. Investors typically turn to gold during periods of monetary uncertainty, as the metal tends to perform well when interest rates are expected to fall, given that it offers no yield.
Adding to gold’s momentum has been weakness in the US dollar. The dollar index fell 0.9 per cent on Tuesday to 96.23, having briefly touched a four-year low of 95.566. A softer dollar generally supports commodities priced in dollars by making them cheaper for holders of other currencies.
Analysts say expectations around US monetary leadership are also influencing sentiment. “Any one of the candidates … will probably be less resistant than Powell to Trump’s demands,” said WisdomTree commodities strategist Nitesh Shah, following President Donald Trump’s announcement that he would soon select a new Federal Reserve chair.
Investment banks are increasingly bullish on bullion. Goldman Sachs has flagged upside risks to its $5,400 gold price target for December, while Deutsche Bank has suggested the metal could reach $6,000 an ounce if dollar weakness persists.
The rally gathered pace earlier in the week, with spot gold jumping more than 3 per cent on Tuesday to $5,181.84, after breaking through the $5,000 level for the first time just a day earlier. Analysts say the underlying drivers of the rally remain firmly in place.
“Rallies normally end because the drivers that took people into the gold market originally dissipate — and that’s just not the case,” said Michael Widmer, commodities strategist at Bank of America.
Gold-backed exchange-traded funds have mirrored the surge in bullion prices. SPDR Gold Shares, the world’s largest gold-backed ETF, rose 2.45 per cent on Tuesday to close at $476.10, according to Nasdaq data, underscoring strong investor inflows into the sector.
Mining stocks have also benefited from the rally, with gains outpacing the rise in spot prices earlier in the week. Newmont shares climbed 4.3 per cent in US premarket trading, while Barrick Mining’s US-listed shares rose 3.4 per cent as gold surged past $5,100 an ounce. Analysts at Societe Generale have said gold could hit $6,000 by year-end, while cautioning that prices could overshoot that level.
Activity in derivatives markets has intensified alongside the rally. On January 26, the CME Group’s metals complex recorded a one-day trading volume of 3,338,528 contracts, surpassing the previous record set in October.
Despite the strong momentum, analysts warn that the rally could reverse quickly if the Federal Reserve adopts a more hawkish tone or if the dollar stages a rebound. Rapid price increases can also dampen physical demand, particularly in price-sensitive markets.
Broader economic sentiment remains fragile. US consumer confidence fell sharply in January, dropping 9.7 points to 84.5, its lowest level since May 2014, according to the Conference Board. Dana Peterson, the organisation’s chief economist, cited “widespread pessimism”, with consumers expressing concerns over prices, tariffs and political uncertainty.
Beyond the Fed decision, traders are also watching developments in Washington closely, including a funding deadline at midnight on January 30. Market participants say any escalation towards a government shutdown could further boost demand for gold as a hedge against uncertainty.
Source:
www.graphic.com.gh
