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Gold prices soared to a new record in Asian trading on Friday, driven by strong safe haven demand as the U.S. presidential election looms and geopolitical tensions escalate. Spot gold rose 0.4% to a record high of $2,705.26 an ounce, while December futures climbed 0.5% to $2,720.15 an ounce.
Safe Haven Appeal Boosts Gold Before U.S. Election
As the U.S. election approaches, the demand for gold as a safe haven has surged. With less than three weeks remaining, the contest between Vice President Kamala Harris and former President Donald Trump is tightening. While polls show Harris holding a slim lead, prediction and betting markets lean toward Trump, fueling uncertainty over the election’s outcome.
This heightened uncertainty has pushed gold prices higher as investors seek refuge in the precious metal. The stark differences between the two candidates’ platforms add to market anxiety, further increasing gold’s appeal.
In addition to the U.S. election, ongoing geopolitical concerns, particularly in the Middle East, have driven safe haven demand for gold. Traders remain wary of Israel’s expected retaliation against Iran after an early-October attack, adding to the metal’s allure as a hedge against global instability.
Gold Shrugs Off Stronger Dollar and Positive U.S. Data
Interestingly, gold’s rise came despite a stronger dollar, which hit a 2.5-month high this week. The dollar’s strength was bolstered by unexpectedly robust U.S. retail sales and a drop in weekly jobless claims, signaling resilience in the U.S. economy.
These economic indicators have led investors to believe that the Federal Reserve may slow its pace of interest rate cuts, reducing the likelihood of aggressive monetary easing in the coming months. However, gold’s appeal persisted, as central banks globally, including the European Central Bank (ECB), continue to lower rates, which bodes well for non-yielding assets like gold.
The ECB’s recent decision to cut interest rates by 25 basis points further underpinned gold’s rally. As major global central banks signal more rate cuts, lower interest rates create a favorable environment for gold by decreasing the opportunity cost of holding non-interest-bearing assets.
Other precious metals saw mixed trading. Platinum futures remained steady at $1,005.95 an ounce, while silver futures gained 1%, reaching $32.095 an ounce.
Among industrial metals, copper prices were flat but on track for a third consecutive week of losses. China’s recent economic stimulus measures, which fell short of expectations, weighed on copper prices, despite the country being the world’s largest copper importer.
Outlook: Gold Poised for Continued Gains Amid Uncertainty
With the U.S. election drawing closer and geopolitical risks mounting, gold is likely to retain its strength as a safe haven asset. Meanwhile, the potential for continued rate cuts by global central banks, including the ECB, further supports the precious metal’s appeal. While a stronger dollar could create some headwinds, the broader market uncertainties and demand for safe assets keep gold on track for sustained gains.
