Gold Price Rises: Will the Surge Continue or Fizzle Out?

Gold prices have seen an increase recently, driven by a weaker dollar and declining Treasury yields. Investors are closely monitoring upcoming inflation data which will help evaluate the Federal Reserve’s monetary policy amidst ongoing trade tensions and worries about a slowing economy.

As of 0501 GMT, spot gold has climbed 0.3 percent to $2,898.27 an ounce, while US gold futures have strengthened by 0.1 percent to $2,902.50.

The dollar index has recently tumbled to a four-month low, making gold more affordable for buyers outside the US. Additionally, benchmark 10-year US Treasury yields have decreased, contributing further support to gold prices.

What’s Behind Gold’s Recent Rally?

According to Ilya Spivak, head of global macro at Tastylive, "With US dollar and Treasury yields falling, gold is gaining some momentum. The overall trend remains in favor of price increases." He added, "For the past four weeks, prices have settled in a range between approximately $2,830 and $2,960. A significant breakout above or below these levels is needed to determine if a more lasting price movement is unfolding."

Recent comments from US President Donald Trump have added an element of uncertainty. In a recent interview, he refrained from forecasting whether his tariffs would lead to a recession in the US, causing a drop in global stock markets.

Last week, Trump implemented a 25 percent tariff on imports from Mexico and Canada, along with additional duties on Chinese products. However, he later provided exemptions for several Mexican and Canadian imports for a month, creating confusion in the markets and heightening concerns about inflation and economic growth in the US.

Investors are now focused on the US Consumer Price Index (CPI) data set to be released on Wednesday, which will aid in assessing the Fed's approach to interest rates.

Gold is widely viewed as a safe haven against political risks and inflation, but if inflation rises significantly, the Fed might keep interest rates elevated, which could diminish the appeal of non-yielding assets like gold.

gold, prices, economy