Gold prices soared to a record high on Tuesday as investors sought safe-haven assets amid escalating tensions in the Middle East and growing expectations of US interest rate cuts. The spot price reached $2,141.59 per ounce, surpassing the previous record of $2,135 set in December, before easing to around $2,128.
The surge comes as the US Federal Reserve is increasingly expected to cut interest rates in June, with borrowing costs currently at 23-year highs. Lower interest rates typically boost gold prices because the metal does not offer any yield. Additionally, gold has risen by more than $300 an ounce since the start of the Israel-Hamas war, reflecting its role as a store of value during political and financial uncertainty.
Ricardo Evangelista, a senior analyst at ActivTrades, said: “Concerns surrounding global economic prospects, geopolitical tensions, and shifting expectations towards earlier interest rate cuts have fuelled increased demand for the precious metal, leading to its upward price trajectory.” Some analysts believe gold could break the $2,300 mark.
However, not all experts are bullish. Patrick Farrell, chief investment officer at Charles Stanley, argued that gold may soon peak, noting that geopolitical tensions are now “priced in” and returns on other investments are rising. He said: “It has been a grim year for many commodities... Gold, in contrast, has reached new highs as geopolitical tensions have increased. This situation may be about to reverse.”
The rally comes despite criticism from famed investor Warren Buffett, who once described gold as having “no utility.” Russ Mould, investment director at AJ Bell, noted that the market is “shrugging off the Sage of Omaha’s words of wisdom and embracing gold instead.” Meanwhile, other assets like bitcoin have also hit records, while the FTSE 100 has lagged due to a lack of technology stocks.
