Gold prices climbed to their highest level in almost three months on Wednesday, driven by rising uncertainty surrounding U.S. President Donald Trump’s policies and a weakened dollar, making the precious metal a more attractive safe-haven investment.
The spot price of gold increased by 1.4%, reaching $2,761 per ounce by 4 p.m. It earlier touched its highest point in 12 weeks, approaching its record high of $2,790.15 set in October. U.S. gold futures also saw a modest rise of 0.3%, settling at $2,766.80.
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In contrast, silver experienced a slight dip, falling 0.24% to $30.71, though it remained near the one-month high reached on January 16. Meanwhile, the dollar index slipped to its lowest point in more than three weeks. A weaker dollar enhances gold’s appeal for investors holding other currencies, increasing its demand.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, commented, “Gold and silver prices have both benefited from the heightened uncertainty created by Trump’s statements, including tariffs. Investors are also weighing the inflationary effects of these policies and their potential impact on monetary decisions. Over the coming weeks, the precious metals market will be influenced by the constant flow of news from Washington,” he told Reuters.
Trump has threatened tariffs on European Union imports and indicated plans for a 10% tariff on Chinese goods, citing concerns over fentanyl trafficking from China to the U.S. through Mexico and Canada.
However, gold’s appeal as an inflation hedge could diminish if Trump’s policies, which many analysts expect to be inflationary, lead the Federal Reserve to keep interest rates elevated for a longer period. Since gold doesn’t generate income, higher interest rates make other investments more attractive.
A slight majority of economists polled by Reuters expect the U.S. Federal Reserve to hold interest rates steady during its meeting on January 29.
ANZ analysts noted that central bank purchases are providing a strong demand base for gold, and they expect investment demand to rise, potentially offsetting losses in physical demand.
