Gold hits record-high as geopolitical turbulence, U.S. election uncertainty drive haven demand

Onome Amuge

Gold prices have surged to unprecedented heights, breaking through the $2,700 barrier for the first time in history.

Fueled by market expectations for additional monetary easing and escalating geopolitical uncertainty, including the US presidential elections and ongoing conflicts in the Middle East, investors have turned to the precious metal as a safe haven asset.

The upward momentum in gold prices reached new heights on Friday, with spot gold skyrocketing by 0.6% to a record-breaking level of $2,709.81 per ounce. Earlier in the day, the precious metal had touched an unprecedented high of $2,714.00, marking another historic milestone in its price trajectory.

For the week alone, bullion prices have surged by over two percent, while US gold futures soared by 0.7 percent to close at $2,725 per ounce, reflecting the continued strength in demand for the safe haven asset in the face of growing global uncertainty.

Analysts are citing mounting geopolitical tensions and uncertainty as the primary drivers behind gold’s impressive climb, with investors increasingly turning to the precious metal as a safe haven asset.

Rhona O’Connell, an analyst at StoneX, elaborated on these developments, stating to Reuters that “the markets continue to look to geopolitics, and the overnight developments in the Middle East are fueling uncertainty.”

As the conflict between Lebanon’s Hezbollah militant group and Israel’s Prime Minister Benjamin Netanyahu intensifies, investors have grown increasingly wary of the potential fallout.

In light of these developments, gold prices have soared to record levels, with the precious metal’s appeal as a safe haven asset gaining renewed traction in the face of growing geopolitical uncertainty.

This upward trajectory in gold prices has been particularly pronounced in Asian markets, as traders in the region seek to protect their portfolios against potential volatility and risk.

In a statement to Reuters, Independent analyst Ross Norman observed that gold’s breakthrough past the $2,700 mark during Asian trading hours indicates that speculative interest is reaching a crescendo.

According to Norman, gold is enjoying robust trading activity, with its price seemingly unaffected by traditional market factors such as declining inflation and Treasury yields.

As gold maintains its upward trajectory, its current rally of over 31 percvent year-to-date can largely be attributed to investors seeking shelter from the prospect of additional monetary easing from central banks, particularly the US Federal Reserve, in addition to escalating geopolitical tensions.

As the U.S. presidential election draws near and polls indicate a close race between Vice President Kamala Harris and former President Donald Trump, investors are increasingly turning to gold as a safe-haven asset.

In response to the heightened uncertainty surrounding the outcome of the election and the potentially divergent policies of the candidates, bullion prices surged to new heights, breaking free from the relatively narrow trading range observed in the preceding fortnight.

Meanwhile, in the physical market, demand for gold in India has dipped due to the record-high prices, leading to dealers offering discounts to attract buyers, especially ahead of a key festival.

Despite gold’s massive gains, market analysts are closely monitoring the precious metal’s trajectory and have identified the $2,750 mark as a potential point of resistance should gold’s ascent continue.

Frank Watson, a market analyst at Kinesis Money, has highlighted this trend channel, stating that “Should gold maintain its upward trajectory, it may encounter resistance at approximately $2,750 an ounce, which aligns with the upper boundary of the rising trend channel we’ve observed since late July.”

UBS analysts predict that gold prices will continue to rise over the next six to 12 months, as interest rates decline and central banks continue to increase their gold reserves.

According to the UBS note to clients, the ongoing demand for gold should remain high due to central banks and other financial institutions seeking to diversify their portfolios and mitigate potential risks, though the pace of these purchases is likely to slow compared to the first half of 2024.

UBS analysts have suggested that gold prices could climb to an unprecedented $2,900 per ounce by September 2025, largely due to the anticipated easing of Federal Reserve policy and continued purchases of the precious metal by central banks.

This prediction is founded on the inverse relationship between interest rates and gold prices, where a decrease in rates typically causes gold to increase in value.