Analysis: What’s next for gold prices as yellow metal surpasses $2,900 per ounce for the first time?

Gold prices had surged to an unprecedented high last week, breaking the $2,900 per ounce barrier for the first time. 

The surge is largely attributed to escalating trade tensions between major economies, which have triggered a flight to safety among investors. 

Gold, traditionally viewed as a safe-haven asset, tends to attract investment during times of economic uncertainty and geopolitical risk. 

Can gold prices rise further?

However, analysts question whether the yellow metal can rise further. 

Gold’s safe-haven appeal has more or less overshadowed the impact of the dollar and US bond yields. 

“It is difficult to say how long this unusual situation will last. In the short term, however, it looks as though the recent record high may not be the last,” Carsten Fritsch, commodity analyst at Commerzbank AG, said. 

Despite the missing traditional support from the US dollar and real yields, precious metals have emerged as a top-performing asset class in 2025. 

The inverse correlation typically observed between gold prices and the 10-year US TIPS yield has significantly weakened lately.

“Instead, we suspect gold has benefitted from investors' fears around the possibility of another trade war,” Investing.com quoted Joe Maher, an assistant economist at Capital Economics as saying in a report. 

Despite the record-breaking rally over the last few weeks, gold’s rally might not sustain for long, according to Maher.

“Concerns that gold may get caught in the trade war crossfire may also have led US investors to buy up gold to get ahead of any future tariffs that might affect US gold imports. This may partly explain the recent stockpiling of gold on the Comex in the US,” he added.

The economist notes that, while recent tariff-related concerns are significant, they are only one factor contributing to the shift away from gold's traditional market drivers.

Additionally, the US and its allies froze around $300 billion of Russian reserves after Russia invaded Ukraine.

This may have motivated central banks to purchase gold as a way to mitigate exposure to US sanctions.

High prices curb demand

The sharp rise in the price of gold has begun to dampen demand in the two most important consumer countries, China and India.

Fritsch added:

As a result, gold in China is being offered at a discount of USD 7-10 per troy ounce to the spot price, he added. 

The situation in India is even more dramatic, according to Commerzbank. 

Gold demand has plummeted 70-80%, according to a senior representative of the India Bullion and Jewellers Association, Commerzbank noted. 

Consequently, Indian gold dealers are offering discounts of $30-$38 per ounce off of official local prices, according to the German bank.

“The industry representative indicated that without the supply shortage, the discount would be even higher, more than USD 100.”

The World Gold Council reported that demand for jewelry in China dropped significantly by 24% over last year, with an even sharper decline towards the end of the year. 

In India, however, jewelry demand only fell by 2%, as a substantial cut in the gold import tax in July 2024 counterbalanced the steep increase in prices.

“This particular demand-supporting factor no longer applies,” Fritsch said. 

China and India together account for more than half of private gold demand.

Other major gold-consuming regions such as the Middle East may also witness a slump in demand due to high prices. 

“These developments show that the gold boom has negative side effects and is not a one-way street,” Fritsch said. 

Gold prices: overbought levels?

“There are two words repeatedly used to describe gold’s performance during the past fortnight: ‘Overbought’ and ‘resilient’,” said David Morrison, senior market analyst at Trade Nation. 

Gold prices surged towards the end of January, decisively surpassing the previous all-time high recorded in October. 

This upward trajectory had been steadily building since mid-December, showcasing a remarkable resilience with a notable absence of any substantial pullbacks or corrections. 

This sustained rally underscored a robust bullish sentiment in the gold market, potentially driven by a confluence of factors such as global economic uncertainties, geopolitical tensions, or a weakening US dollar.

“This was an impressive, and stealthy, rally which saw a gentle rise in the daily MACD as upside momentum continued to build,” Morrison said. 

That helped gold hit a fresh all-time intra-day high of over $2,964 last week. 

Prices subsequently pulled back a touch and were around $2,910 per ounce on Monday. 

“But whereas such a pullback was typically the precursor to a deeper sell-off throughout most of 2024, this time round it turned out to be a buying opportunity,” Morrison added.