Gold Prices In New High on US Election, Middle East Tension

Gold prices rose to $2,740 per ounce on Tuesday, a new record high since the beginning of the year and one of the strongest annual gains in the commodity over the past 45 years. 

The new high is buoyed by the U.S. political uncertainty, geopolitical tensions in the Middle East, and global central banks’ easing policies, driving ongoing demand for gold as a haven.

With the US presidential election just over two weeks away, polls suggest that former President Donald Trump’s chances of winning are increasing. This possibility is prompting investors to seek more safe-haven assets like gold to hedge against potential controversial policies he might implement, which could impact inflation, monetary policy, and global trade.

Additionally, the persistent geopolitical tensions in the Middle East support gold prices, as demand for safe-haven assets grows with no clear signs of de-escalation in the near term. Furthermore, the easing monetary policies introduced by several central banks are driving gold demand and may continue to support it in the medium and long term.

Considering these factors, the traditional drivers that influence gold prices, such as the U.S. dollar and interest rates, no longer explain the significant rise. Instead, geopolitical tensions and the U.S. elections may be more critical factors during this period. In this context, it’s worth noting that gold exchange-traded funds (ETFs) have seen consistent inflows throughout the last week, reinforcing the belief that investors are viewing gold as a hedge against rising risks.

Gold prices have reached levels that may appear overstretched, and the Relative Strength Index (RSI) indicates that the market has entered overbought territory. This indicator often signals a potential downturn or price correction shortly, especially as U.S. Treasury yields continue to rise, which could affect gold’s appeal compared to other assets.