Driven by the start of interest rate cuts by the Federal Reserve and instability in the Middle East, gold prices remain near the all-time high reached last week, which marked a 29% increase since the beginning of the year.

Geopolitical tensions and changes in monetary policy maintain gold’s appeal as a hedge against uncertainty. The price of the golden metal had reached a new all-time high of €2,430 per ounce on Thursday last week, marking a 29 per cent rise since the beginning of the year, the highest increase in the past 14 years.

After experiencing spot volatility in recent days, Tuesday’s Iranian retaliation and Israel’s invasion of Lebanon are raising fears that this armed conflict will escalate into a wider regional war and keep gold prices higher.

Retail consumers in key markets respond to rising prices by selling their gold holdings to capitalise on the gains. ‘Physical demand is slowing as investors are hesitant to buy at record prices, but momentum trading continues to drive futures demand,’ says commodity strategist at derivatives platform Saxo Bank, Ole Hansen.

Fed cools expectations of big cuts

Federal Reserve Chairman Jerome Powell’s recent remarks at the National Association for Business Economics conference dampened hopes for aggressive future rate cuts, reducing analysts’ forecasts for a 50 basis point cut from more than 60% last week to just 37% on Wednesday.

Powell noted that further moves are likely to be limited to quarter percentage point reductions and added that ‘this decision reflects our growing confidence that, with an appropriate recalibration of our monetary policy, the strength of the labour market can be maintained at one around moderate economic growth and inflation moving sustainably down toward our objective’.

On the other hand, China’s economy remains sluggish, which has prompted its central bank, the People’s Bank of China (PBoC), to take additional measures to stimulate the economy, spurring flows into its booming stock market.

The current rise in gold prices against declining physical demand reflects significant global economic changes and geopolitical tensions. As markets digest these complex factors, investors will closely monitor developments in the Middle East and the release of upcoming economic data.

To discover the best option to protect your savings, go to Preciosos 11Onze. We will help you buy the ultimate safe-haven asset, physical gold, at the best price.