Gold surged to a new record, briefly surging above $3,060 an ounce, on Thursday as the US Federal Reserve signalled two potential interest rate cuts this year.
The froth came off a little as the yellow metal settled around $3,045.17 at 8.14 am.
Investors are turning to gold amid geopolitical tensions, a weaker American dollar, and expectations of lower interest rates, which make non-yielding assets like bullion more attractive.
In a note on Wednesday, UBS this upward surge for gold wasn’t a surprise - it was more a matter of when rather than if it would happen.
One key factor in this rally has been strong demand from investors buying into gold ETFs (exchange-traded funds).
Even though more money is flowing into these funds, total holdings are still well below the peak reached five years ago, meaning there’s room for more buying. Notably, Chinese gold ETFs have seen a sharp increase, suggesting growing interest despite weaker jewellery sales.
UBS remains optimistic about gold’s prospects and sees further upside potential. The Swiss investment banks believe thin market liquidity could amplify price moves and that more investors will see gold as a crucial hedge against economic or geopolitical turmoil.
The longer gold stays above $3,000, the more investors may jump in, fearing they’ll miss out. This could also boost interest in silver and platinum as traders look for alternative ways to ride the gold rally.
"We remain bullish gold and see upside risks to our forecasts," UBS said. In plain language, that suggests the Swiss bank believes the price will go above its current target price of $3,200 an ounce.
Overnight, Federal Reserve Chair Jerome Powell acknowledged that President Trump’s tariffs could slow growth and drive inflation, adding to economic uncertainty. Meanwhile, escalating violence in the Middle East has further boosted gold’s appeal as a safe-haven asset.
Analysts see potential for short-term corrections but expect gold to remain strong. Silver was flat at $33.80, while platinum and palladium edged lower.