Gold surges past $5,600 as geopolitics and weak dollar fuel record rally

Gold prices continued to surge to new record highs as the yellow metal cleared $5,600 per ounce on Thursday. 

Gold had surged past the $5,000 threshold for the first time this Monday, marking a weekly gain of over 10%. 

This rally is attributed to a combination of strong factors: robust safe-haven investment, persistent central bank purchases, and a depreciation of the dollar.

The strength persisted into early-morning trading in Asia, driving gold on COMEX to a new peak of $5,625.89 per ounce at one point.

Prices were currently just shy of $5,600 an ounce. 

Experts and brokerages had raised their forecast for gold, with many expecting the metal to hit $6,000 by the end of this year.

However, the way prices have been behaving, one would not be surprised if that ceiling were breached sooner. 

“Geopolitical tensions, a weaker dollar, and investor rotation out of currencies have boosted the precious metal,” Ewa Manthey, commodities strategist at ING Group, said in a note. 

Silver has seen a gain of nearly 65%, significantly outperforming gold, which is up approximately 27% year-to-date.

Unperturbed by Fed’s hawkish tone

“Meanwhile, the non-yielding Gold seems rather unaffected by US Federal Reserve (Fed) Chair Jerome Powell's hawkish remarks on Wednesday that followed the highly anticipated decision to leave interest rates unchanged,” Haresh Menghani, editor at FXStreet, said in a report. 

As expected, the US Federal Reserve maintained its current interest rates following its two-day meeting that concluded on Wednesday. 

However, the decision was not unanimous, as two Fed Governors, Stephen Miran and Christopher Waller, dissented, advocating instead for a 25 basis-point rate cut.

Despite Fed Chair Jerome Powell stating in the post-meeting press conference that inflation remains significantly above the 2% target, the subdued market reaction indicated that investors continue to harbor concerns regarding potential threats to the Fed's independence.

The independence of monetary policy formulation is currently a key concern, highlighted by both a Department of Justice criminal investigation into Powell and the ongoing effort to dismiss Fed Governor Lisa Cook.

Traders are currently confident that the Fed will keep interest rates unchanged until at least the end of this quarter, and potentially until Chair Jerome Powell's term concludes in May. 

Despite this expectation of near-term stability, the market is still anticipating two additional rate cuts in 2026.

Geopolitics provide support

In a development concerning international relations, US President Donald Trump, speaking on Wednesday, called on Iran to negotiate a deal regarding nuclear weapons. 

He issued a warning that if the US were to launch an attack in the future, it would significantly surpass the severity of the strike on Iranian nuclear sites that occurred last year.

In response, Tehran issued a warning, threatening to retaliate against the US, Israel, and their supporters.

Russia's ongoing aerial campaign against Ukrainian cities and infrastructure included a recent drone strike on a passenger train in northeastern Ukraine, resulting in five fatalities.

“This, along with the emergence of fresh US Dollar selling, assists the safe-haven Gold to prolong the record-setting rally for the ninth straight day and climb to the $5,600 neighborhood during the Asian session on Thursday,” Menghani said. 

Elsewhere, silver prices on COMEX came within a whisker of hitting a record of $120 per ounce on Thursday. 

Prices touched a record peak of $119.450 an ounce earlier in the day, and were currently around $118.5 per ounce.