Gold prices soared to unprecedented levels on Tuesday, propelled by its safe-haven allure amidst anticipations of interest rate reductions in the United States amid growing economic uncertainties.
Surpassing its previous pinnacle achieved in early December, gold reached $2,141.79 per ounce around 1330 GMT before experiencing a slight pullback. This surge marks a remarkable ascent of about 15 percent in value since the same period last year.
Analyst Ricardo Evangelista from ActivTrades highlighted that a combination of concerns regarding global economic prospects, geopolitical tensions, and shifting sentiments towards earlier interest rate adjustments has spurred heightened demand for the precious metal, propelling its upward trajectory.
The week's notable surge was partly catalyzed by discouraging data released over the weekend. A report revealed that US manufacturing activity contracted more rapidly in February than anticipated, signaling a slowdown in demand and output. This unexpected downturn has fueled speculation that the Federal Reserve might expedite its plans for interest rate cuts to stimulate economic activity.
Thu Lan Nguyen, an analyst at Commerzbank, echoed sentiments of cautious optimism amidst the ongoing rally in gold prices. Nguyen emphasized the lingering uncertainty surrounding the timing and scale of the next interest rate adjustment cycle in the US, suggesting a possibility of a minor downward correction in the near term due to profit-taking activities.
Meanwhile, despite gold reaching historic highs, investment trends across Western economies depict a contrasting narrative. Adrian Ash, reporting for BullionVault, noted a consistent trend of net selling among investors in Western regions. As gold attains new record prices, investors are capitalizing on profits and rebalancing their portfolios, reflecting a cautious stance towards the precious metal.
Despite net sales amounting to 1.6 tonnes of gold over the past six months, the value of gold investment holdings has surged to a fresh all-time high, surpassing $3.1 billion. This surge in value, juxtaposed with declining holdings, underscores the resilience of gold as an asset class amidst prevailing market uncertainties.
Throughout February, as gold prices fluctuated before witnessing a surge in early March, the Gold Investor Index data from BullionVault indicated a decline in the number of gold buyers alongside an increase in sellers. This fluctuation reflects the dynamic nature of investor sentiment amidst evolving market conditions.
