Retreating Dollar Puts Gold Back in the Spotlight

A retreating dollar is exactly what gold needed to put the precious metal back into the investment spotlight. Hotter-than-expected inflation in January pushed the yellow metal below the $2,000 mark. But it has been rising again with geopolitical factors providing tailwinds along with a weaker greenback.

Tensions in the Middle East could push investors back into the metal as part of a scramble for safe haven assets. In parts of the world, recessionary pressure could feed into higher the precious metal’s prices.

“We also have lingering geopolitical instability, which favours the safe-haven gold, and also uncertainty about the economic outlook, with Japan and the UK both now in technical recession … alongside China,” said Ricardo Evangelista, senior analyst at ActivTrades.

In the interim, all eyes remain on the U.S. Federal Reserve and what it will do with interest rates. The central bank has been holding steady, waiting for economic data to substantiate rate cuts. Once that happens, it could open the floodgates for more gains for the yellow metal.

“Any signs of economic weakness could spark hope that rate cuts could be on the way, which may assist gold,” said Tim Waterer, chief market analyst at KCM Trade.