Gold sets new record high, why is the metal dominating the markets today?

The Price of Gold Continues to Surge

The price of gold is challenging yet another historic high, just below the $2,400 threshold in today’s Asian session, remaining on track to mark the third consecutive weekly gain and extending its record-breaking rally.

Factors Driving the Surge

In detail, the XAU/USD pair is trading at $2,386.61 just before the European stock markets open, while gold futures soar to $2,404.10 as of now, with a jump of 1.33%.

The stellar rally of gold faltered mid-week after a hotter-than-expected US inflation data, but has since recorded a fourth weekly gain, the longest streak since January last year.
The gains have been driven by increased geopolitical risks in the Middle East and Ukraine, as well as central banks’ gold purchases, led by China.

Despite factors offsetting the gold rush, such as the bullish sentiment on the US dollar, supported by expectations that the Fed may delay interest rate cuts, bullions have taken center stage in the markets.
The reasons for the advance are diverse, from perceived geopolitical risks by investors to the role of central banks and the uncertainty in US monetary policy.

Gold prices have risen today once again, reaching a historic peak.
Central bank purchases amid geopolitical tensions have supported the momentum of the yellow metal, while strong US economic data have failed to dampen the allure of gold.

Investors remain concerned about the risk of further escalation of geopolitical tensions in the Middle East, which in turn is seen as a key factor favoring the precious metal, a safe haven.
Russia, Germany, and the UK convened on Thursday and called on Middle Eastern countries to show restraint, especially regarding the looming threat of an Iranian strike on Israel.
Israel, on the other hand, has declared readiness to “meet all its security needs” in a region prone to a potential aerial attack from Iran.

This comes after Tehran vowed revenge for the April 1st airstrike on its embassy in Damascus (Syria), which killed a senior Iranian general and six other Iranian military officers, heightening already soaring tensions over the Gaza conflict.

Israeli Defense Minister Yoav Gallant warned US Defense Secretary Lloyd Austin that Israel would respond directly to any Iranian attack.

“One thing that is certainly fueling this central bank gold buying is the wars happening worldwide – if we look at history, this has always happened because gold is a safe haven asset,” commented ACY Securities analyst Luca Santos to Reuters.

Gold prices have also weathered the sudden shift in expectations of interest rate cuts by the Federal Reserve, pushed back from June to September, following hot Consumer Price Index (CPI) and Producer Price Index (PPI) data from the US.
Inflation data and expectations for high rates have kept the US dollar and US Treasury yields strong.

However, the Wall Street tech rally overnight has fueled a scaling back of the greenback’s strength, further facilitating the rise in gold prices.

From a broader perspective, bullions are supported by the surge in gold purchases by global central banks, including Turkey, Kazakhstan, and China.

Throughout the day, gold prices will continue to take cues from ongoing geopolitical developments in the Middle East according to Fxstreet analysts.
At the same time, traders will also keep an eye on US consumer confidence data and speeches from Fed policymakers.