While turbulence over Trump’s ambitions for Greenland and pressure on the Federal Reserve have provided the latest support for gold, the precious metal has been at two-year highs on factors ranging from a weak dollar, strong central bank demand and high inflation.Gold was at just over $2,000 per ounce in January 2024.
The price of the precious metal has also risen due to the wars in Ukraine and Gaza, as well as Washington’s intervention in Venezuela.
“In recent days, gold’s price action has been a textbook example of a safe haven,” said Fawad Razaqzada, market analyst at Forex.com.
“The underlying demand for protection is still there. Confidence in the dollar and bonds seems a bit shaky.”Slow burning support
Trump last week backed away from threatened tariffs on several European countries over their opposition to Washington’s seizure of the mineral-rich Arctic island of Greenland.
But his comments sparked a crushing transatlantic crisis, rekindling fears of a trade war and uncertainty about U.S. investments.
The dollar fell to a four-month low against the euro, while gold prices rose.
“Gold rose to a new record high as geopolitical tensions remain high,” Neil Wilson, investor strategist at Saxo UK, noted on Friday.
“The extreme tail risk of a US military intervention in Greenland was never priced in by the markets. The concerns about an escalating trade war were.”
Danish Prime Minister Mette Frederiksen visited the capital of Greenland on Friday for talks with the region’s leader.
Investors were also preparing for this week’s Federal Reserve policy meeting, which comes after US prosecutors targeted boss Jerome Powell, raising fears about the bank’s independence.
Trump has made no secret of his disdain for Powell. He claims there is “no inflation” and repeatedly questions the competence and integrity of the Fed chairman.
The heads of major central banks last week backed the Fed and Powell after U.S. prosecutors issued subpoenas against him threatening criminal charges.
“Add to that lingering doubts around central bank independence and you’re left with a slow-burning base of support for gold,” said independent analyst Stephen Innes.
Gold demand rose 44 percent year-on-year in value to a record $146 billion in the third quarter of last year, the World Gold Council said in its latest report.
There has also been strong demand for gold through Exchange-Traded Funds in the stock markets. ETFs allow investing without trading the gold futures market.
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