Gold Surges as Dollar Weakens and Investment Demand Rises

Gold prices rose sharply on Monday, supported by the U.S. Dollar Index falling to its lowest level in a week, alongside concerns that foreign investors are shifting part of their dollar assets into precious metals. This worry follows a Bloomberg report stating that Chinese regulators asked financial institutions to reduce their holdings of U.S. Treasury bonds, renewing questions about the status of U.S. assets as a safe haven.


Safe-Haven Demand Boosts Gold


Gold is benefiting from strong safe-haven demand amid uncertainty over U.S. tariffs and geopolitical tensions in Iran, Ukraine, the Middle East, and Venezuela. The metal is also supported by growing bets on a weaker dollar, particularly after U.S. President Donald Trump stated last month that he is comfortable with a softer currency, prompting investors to turn to gold as a store of value.


Political uncertainty in the United States, combined with a large fiscal deficit and unclear government policies, continues to push investors away from dollar assets and toward precious metals.


Central Bank Purchases Strengthen Prices

Gold also receives support from central bank buying. The People’s Bank of China (PBOC) increased its gold reserves by 40,000 ounces in January, bringing the total to 74.19 million ounces. This marks the 15th consecutive month of purchases, reflecting a global trend toward diversifying reserves away from the dollar.


High Liquidity Supports Precious Metals

Abundant liquidity in the U.S. financial system further fuels demand for gold and silver. The Federal Reserve’s $40 billion monthly injections, announced in December, have reinforced the appeal of precious metals as hedging instruments.

Investment Demand Remains Robust

Investment demand for gold remains strong. Gold ETF holdings reached a three-and-a-half-year high on January 28. Silver ETF holdings also hit a 3.5-year high on December 23, before retreating to a 2.5-month low last week, showing continued volatility but sustained interest in precious metals.