Gold Rally Accelerates as Tensions Rise and Global Demand Surges

Gold continues to command investor attention as it breaks above the $3,400 mark, fueled by escalating geopolitical tensions and growing expectations of a US rate cut. Safe-haven demand has intensified following renewed conflict in the Middle East, while central bank purchases and structural shifts in global reserves further reinforce the metal’s long-term appeal. With Asia emerging as a key player in gold market infrastructure and technical indicators pointing to sustained bullish momentum, the rally appears to be underpinned by both fundamental and regional dynamics.

Gold Breaks Above $3,400 as Geopolitical Tensions and Rate Cut Bets Fuel Rally

Gold prices surged to their highest level in over a month, rising to $3,444.39 per ounce, as investors moved into safe-haven assets following Israel’s strike on Iran. Bullion is up more than 3.5% for the week, with US futures also gaining 1.4%. The escalation in Middle East tensions overshadowed trade talks and lifted gold past key resistance at $3,400. Meanwhile, soft US labor data and cooling inflation strengthened expectations of a Fed rate cut by September. Silver, platinum, and palladium were also on track for weekly gains despite minor day-to-day moves.

Gold Dethrones Euro as Central Banks’ Second-Favorite Reserve Asset

Gold has overtaken the euro as the second-largest asset in global central bank reserves, now accounting for 20% by market value, compared to the euro’s 16%, according to the European Central Bank. This shift is driven by record central bank purchases—over 1,000 tons annually for three consecutive years—amid geopolitical tensions, inflation fears, and concerns over Western financial sanctions following Russia’s invasion of Ukraine. The trend is particularly strong among countries aligned with China and Russia, with total gold holdings now reaching levels last seen in the 1970s.

Asia Ignites Gold Futures Rush

The gold market competition in Asia is intensifying as the Abaxx Exchange in Singapore launches a US dollar-denominated gold futures contract, aiming to establish a regional benchmark. This move comes amid soaring gold demand, record prices, and geopolitical tensions. Other key developments include Hong Kong’s push to become a major gold trading hub and Shanghai’s plans for an offshore settlement vault. The Asia Pacific Precious Metals Conference in Singapore will highlight these trends as Asia positions itself as a growing force in the global gold trade.

Technical Analysis

Gold has extended its multi-month rally from the late 2024 low of $2,536.59 per troy ounce, recently reaching $3,444.39 amid intensifying geopolitical tensions and increased demand from central banks. The technical landscape remains firmly bullish, with price action holding above both the 20- and 50-period Exponential Moving Averages (EMAs). Momentum indicators also confirm the upward bias, as the Momentum oscillator remains above the 100 mark, and the Relative Strength Index (RSI) continues to trade above the 50 level.

Should bullish momentum sustain, key resistance levels to monitor include $3,499.86, $3,581.36, and $3,691.35. Conversely, if a corrective phase unfolds, potential support levels are seen at $3,403.40, $3,293.41, and $3,120.76.

Dollar Slides to Three-Year Low as Global Currencies Surge

The US dollar has fallen to a three-year low, down nearly 10% year-to-date, as expectations for Fed rate cuts and shifting trade policies drive capital outflows. Scandinavian currencies have been standout performers, with Sweden’s krona up 15% and Norway’s 13%, largely due to dollar weakness. Traditional safe-haven currencies like the euro, Swiss franc, and yen have also surged, creating challenges for central banks facing deflationary pressures.

Conclusion

Gold’s breakout above $3,400 reflects a confluence of strong technical momentum, rising geopolitical risk, and structural shifts in global reserve strategies. With central banks accelerating purchases, safe-haven demand surging, and Asia stepping up as a regional trading force, the metal’s bullish narrative remains firmly intact. Unless there is a significant easing in geopolitical tensions or a sharp shift in monetary policy expectations, gold is likely to remain well-supported in the near term.