In the face of increased market uncertainty and geopolitical tensions, gold rose sharply for a second day in a row. Political unrest in Germany, declining trust in the US dollar, and concerns about the escalation of the Middle East conflict all contributed to gold’s surge of more than 4% in two sessions.
Investors became even more concerned when the German Parliament failed to confirm Chancellor Friedrich Merz. Gold’s momentum was further boosted by the volatile foreign exchange market and the effects of volatile Asian currencies. Once markets process these risks, the focus turns to whether gold could test its all-time high of $3,500.
What is Driving the Current Gold Price Rally?
Geopolitical concerns have continued to fuel the gold price rally. Among the issues are Israel’s increasing military actions in Gaza and the Trump administration’s pledges to negotiate a trade deal.
US Commerce Secretary Howard Lutnick has hinted that a top-ten global economy may be involved in the long-awaited trade deal. Due to these uncertainties, investors have resorted to gold, which is thought to be a reliable store of value in emergencies.
Another shock was the political unrest in Europe. Friedrich Merz was unable to win a majority in the German Bundestag, which threatened the stability of the government. As a result, there is a greater trend toward gold as confidence in European political unity declines.
Can Asian Currencies Trigger a Market Domino Effect?
Asian currency volatility gave market sentiment new dimensions. The Taiwan dollar saw a sharp increase against the US dollar on Monday. Analysts warned this could trigger a broader regional impact and a potential “reverse Asian currency crisis.”
Charu Chanana believes that if regional currencies continue to rise, Asian institutions might reconsider their unhedged exposures to US bonds. This would impact the dynamics of the FX market and devalue the dollar.
One significant move was the Shanghai Gold Exchange’s announcement that it would be expanding its warehouse operations to Hong Kong. The goal of this action is to increase the global reach of gold products denominated in yuan and strengthen integration with offshore foreign exchange market operations.
According to the CME FedWatch tool, there is a 2.4% chance of a Federal Reserve interest rate cut in May. In June, the chances are that it will be slightly higher, at 29.8%. These figures indicate that there will be some monetary easing soon.
Investors Watch for Gold’s Next Big Move
Technically, gold has already breached a significant resistance level at $3,368; $3,403 is the next upward target. The momentum indicates that it may soon be put to the test, especially if President Trump’s administration falls short of its trade pledges, even though Tuesday’s trading may not push it to its all-time high of $3,500.
On the downside, $3,303 and $3,268 are support levels that provide solid retreat points in the event of unexpected declines. Traders are now monitoring key developments in the US-China trade to predict how this gold price rally will play out. The rally may get stronger if these problems continue or worsen.
Will This Gold Price Rally Hold?
The ongoing gold price rally highlights a larger risk trend affecting global markets. Despite the political unpredictability in Germany and the erratic swings in Asian currencies, gold remains a beacon of hope for investors. Until monetary policy and global governance are clarified, this rally is probably going to continue.
About The Author
