Gold prices surged to a new all-time high of $3,051.96 on Wednesday night, fueled by the US Federal Reserve’s decision to maintain interest rates and its projection of slower growth coupled with higher inflation. The precious metal has climbed 16% this year, building on last year’s strong performance, as investors seek safe-haven assets amid a gloomy economic outlook.
Fed’s Decision and Investor Caution
The Fed’s decision to keep interest rates steady for the second consecutive meeting, along with its cautious economic outlook, has spurred continued demand for gold. UBS Global Wealth Management’s Mark Haefele noted, “While the market has drifted into technical overbought territory, the prevailing mood among investors remains cautious, which is likely to support the appetite for gold.”
Gold has long been viewed as a hedge against uncertainty, and Haefele highlighted its importance as a portfolio safeguard against both short-term risks and long-term economic volatility.
US Policy Uncertainty and Geopolitical Tensions Fuel Gold’s Rise
Fed Chairman Jerome Powell acknowledged the uncertainty surrounding President Donald Trump’s trade policies, reiterating that the central bank is not rushing to adjust borrowing costs. Following the Fed’s decision, both the dollar and Treasury yields dipped, further boosting gold’s appeal.
The decision to keep rates unchanged coincides with the ongoing pressure from Trump’s trade policies, which have heightened fears of an economic slowdown and contributed to a risk-off sentiment in the markets. Geopolitical tensions, including the conflict in the Middle East and hostilities between Russia and Ukraine, have also fueled demand for gold as a safe-haven asset.
Gold Prices Surge in UAE Amid Economic Uncertainty
The UAE, known as the “City of Gold,” has seen a notable rise in gold prices, with 24-carat gold per gram climbing to Dh367.50, a jump of nearly Dh20 in just 20 days. Vijay Valecha, Chief Investment Officer at Century Financial, attributed this surge to increasing concerns over inflation and economic uncertainty.
The approaching festivals, such as Eid Al Fitr and Akshaya Trithiya, have further driven demand for gold jewelry. Akshaya Trithiya, traditionally one of the busiest days for gold purchases in the UAE, is expected to see strong sales. Retailers are offering discounts and promotions to attract buyers, despite the higher prices.
Gold’s Bullish Outlook
Despite some uncertainty over whether gold’s rally can continue, geopolitical tensions, expectations of faster rate cuts by the Fed, and strong inflows into exchange-traded funds (ETFs) are supporting the metal’s upward trajectory. UBS has raised its gold price target to $3,200 per ounce by June and through March 2026, maintaining its bullish stance on the precious metal.
Conclusion
As geopolitical tensions, economic uncertainties, and central bank policies continue to shape market dynamics, gold remains a critical asset for investors seeking security and stability. The Federal Reserve’s decision to maintain interest rates and concerns over global trade policies have only strengthened gold’s appeal. With the potential for further rate cuts and continued safe-haven demand, gold prices are expected to remain resilient. While some caution may arise with high prices, the overall bullish outlook for gold persists, making it a key player in investment portfolios looking to navigate these uncertain times.