Gold, the classic safe haven in financial markets, rose to 2,156.70 dollars on Wednesday after a 0.65% gain, surpassing its previous peak from December 4 when it touched 2,135 dollars. Earlier in the session, it had traded at 2,141 dollars with a 1.27% rise shortly after Wall Street opened.
However, after European markets closed, the metal pared gains to around 0.7%, trading near 2,130 dollars per ounce. For the year, gold is up about 3.8%, and over the past twelve months it has gained roughly 18.3%.
The advances come despite remarks from the United States Federal Reserve Chair Jerome Powell to the House of Representatives. Powell reiterated expectations for rate cuts this year, but he is not yet ready to specify when, citing inflation risks. He said,
“We do not expect it to be appropriate to cut rates until we are confident that inflation is on a sustainable path to 2%.”
Banks and Geopolitical Tensions
Jupiter Asset Management portfolio manager for gold and silver, Ned Naylor-Leyland, notes that a key reason for gold’s resilience is the large-scale purchases by central banks around the world, even as real interest rates stay elevated.
According to the UK firm’s expert, central banks bought about 1,037 tons in 2023, the second-largest annual total on record. He also highlights robust bullion flows in Asia, following recent withdrawals from the Shanghai Gold Exchange, signaling strong total demand in China, the highest since July 2015.
Nevertheless, Western investors remain largely on the sidelines, as evidenced by a decline in gold-backed exchange-traded funds. The expert expects negative ETF flows to reverse decisively once gold breaks the 2,150-dollar mark per ounce, predicting a notable shift in sentiment.
Gold’s rally has been driven in part by renewed focus on the Palestinian-Israeli conflict, which has contributed to a rise of more than 15% since October 7, the date of the attack by Hamas on Israeli territory.
Thus, supported by geopolitical risk and central bank purchases, gold reached a new historical level above 2,100 dollars earlier in December.
Before that autumn rally, the last time gold traded above 2,000 dollars was in May 2023, driven by tensions in Ukraine and the fallout from the U.S. regional bank crisis, along with the Credit Suisse collapse earlier in the year, which had briefly pushed the price to around 2,063 dollars in early May.
Gold, Bitcoin, and Wall Street Records
Gold’s gains coincide with record highs for U.S. indices like the Nasdaq and the S&P 500, and for Bitcoin as well. The leading cryptocurrency surpassed its previous peak, crossing 69,191.95 dollars in a single day.
Over the past year, Bitcoin has surged about 200%, becoming the top performer among major assets, buoyed by expectations of multiple Federal Reserve rate cuts this year. In 2023, Bitcoin finished with an annual gain of around 108%.