Gold shines as confidence in reserve assets fades
GOLD is on the rise again, as a confluence of economic and political dynamics spurs demand from investors around the world, especially one cohort: central banks.
Gold prices are surging as a mix of economic and political factors boost investor confidence in reserve assets, particularly among central banks. The price of bullion has soared around US$400, or 10%, since the start of the month, nearing its best monthly performance in a century. This surge is fueled by a series of US-related events, including the Federal Reserve's dovish stance on interest rates, weak employment data, and tame inflation figures, which have dampened expectations of a Fed rate hike and depressed the US dollar.
However, geopolitical tensions, such as the re-escalating US-Iran war, and concerns over the Federal Reserve's independence and credibility add to the appeal of gold as a hedge against uncertainty. Meanwhile, doubts about the Fed's two percent inflation goal and the possibility of President Trump firing the chair of the Federal Reserve further unsettle the bond market.
Central banks have been reducing their Treasury holdings, with the lowest levels in 18 months, as they diversify away from US debt. The combination of these factors presents a compelling case for central banks to increase their gold holdings, as they seek to protect themselves against currency risk, inflation, and geopolitical instability.
While central banks move cautiously, the persistent demand for gold as a strategic asset indicates that its allure is unlikely to fade anytime soon.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
