Gold Prices Surge as Geopolitical Tensions Mount

Gold continued its upward trend on Tuesday, building on momentum that pushed it past the US$5,100 mark for the first time in the previous session. The rally is fueled by strong safe-haven demand as investors navigate growing geopolitical uncertainty and a weakening U.S. dollar.

Spot gold climbed 1.1% to US$5,068.05 per ounce, after hitting a record high of US$5,110.50 a day earlier. Meanwhile, U.S. gold futures for February delivery saw a 0.4% increase, trading at US$5,063.0 per ounce.

Dollar Weakness and Trade Disputes Bolster Gold

A primary driver behind gold's ascent is the U.S. dollar, which is lingering near a four-month low. The dollar's weakness is compounded by domestic issues, including the possibility of a government shutdown and unpredictable policymaking. A weaker greenback makes gold, which is priced in dollars, more affordable for international buyers.

Adding to market anxiety are escalating trade tensions. On Monday, U.S. President Donald Trump announced plans to raise tariffs to 25% on South Korean imports, including autos, lumber, and pharmaceuticals, citing frustrations over a trade deal. This move followed threats of tariffs against Canada, even as relations between the two countries were changing, underscored by Prime Minister Mark Carney's visit to China earlier in the month.

Federal Reserve Policy and Leadership in Focus

Investors are also closely watching the Federal Reserve, which is expected to keep interest rates unchanged at its upcoming monetary policy meeting. However, the central bank is operating under a cloud of political pressure.

The situation is complicated by a criminal investigation into Fed chief Jerome Powell by the Trump administration, an ongoing effort to remove Fed governor Lisa Cook, and the approaching nomination of Powell's successor in May. This backdrop of instability is contributing to the uncertain economic outlook driving investors toward gold.

Mining Sector Heats Up with Major Acquisition

The record-high gold prices are directly impacting the mining industry, boosting profit margins and encouraging consolidation.

In a sign of this trend, Zijin Gold announced it will acquire Canada's Allied Gold for approximately C$5.5 billion (US$4.02 billion) in cash. The deal highlights the Chinese mining company's push for global expansion as it capitalizes on the favorable market conditions.

How Other Precious Metals Are Faring

The rally is not limited to gold, with other precious metals seeing significant price movements.

• Silver: Spot silver jumped 6.3% to US$110.39 an ounce, a day after reaching a record high of US$117.69. The metal has gained an impressive 55% so far this year.

• Platinum: After hitting a record of US$2,918.80 in the prior session, spot platinum fell back 2.5% to US$2,688.12 per ounce.

• Palladium: The metal saw a slight increase of 0.1%, rising to US$1,980.50.