Geopolitical risks are a significant driver of the current gold rally, with analysts suggesting further upside potential. Gold has surged to record highs, driven by various geopolitical and economic uncertainties.
Greenland Dispute and Tariffs:
President Trump's threats of tariffs on eight European countries if the U.S. is not allowed to buy Greenland are pushing investors towards safe-haven assets like gold.
This has contributed to gold's rise, with spot gold jumping to a record peak of $4,689.39 an ounce.
Federal Reserve Independence Concerns:
A criminal investigation into Federal Reserve Chair Jerome Powell by the U.S. Department of Justice, coupled with President Trump's pressure to influence interest rates, has raised concerns about the Fed's independence.
This uncertainty is leading to "devaluation trades" and increasing gold's appeal as a currency hedge.
Other Geopolitical Tensions:
Unrest in Iran, including protests and potential U.S. intervention, along with developments in Venezuela and the ongoing Russia-Ukraine war, are mounting pressure on investors to seek safe-haven assets.
Expectations of Fed Rate Cuts:
Despite the controversies, expectations of at least two Fed rate cuts this year further support gold prices.
Central Bank Demand:
BRICS nations and emerging economies are actively diversifying away from the U.S. dollar by purchasing record levels of gold, contributing to the rally.
Outlook: Analysts at Citi Research are tactically bullish on precious metals, setting a price target of $5,000 an ounce for gold in the next three months, explicitly citing that geopolitical tensions are likely to remain elevated. Market expert Ed Yardeni has even suggested gold could reach $10,000 an ounce by 2030.
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