Summary
- It was reported that gold prices surpassed $3,500 per ounce as trust in US assets weakened due to the potential dismissal of the Fed Chair by President Trump.
- It was stated that gold prices have surged this year, with increased inflows into bullion-based ETFs and purchases by central banks worldwide.
- Despite the outlook that gold will become the 'only true safe asset,' the recent surge increases the likelihood of a correction.
Trust in US Assets Plummets Amid Trump's Fed Threats, Sustained Gold Demand
Gold Prices Enter Overbought Territory with Continuous Surge
Concerns that President Trump might dismiss Federal Reserve Chair Jerome Powell have triggered a sell-off in US stocks, bonds, and the dollar, pushing gold past $3,500 per ounce for the first time.
On the 22nd (local time), gold prices rose by 2.2% after a 2.9% surge the previous day.
President Trump criticized Powell the previous day, urging an immediate rate cut. This was seen as a threat to the Fed's independence, causing the dollar's value to drop to its lowest level since 2023.
Kalani Index Services analyst Li Liang Le said, "This year's sharp rise in gold prices suggests that market confidence in the US is weaker than ever." She added, "The 'Trump Trade' has turned into a 'Sell America' trend."
As trust in dollar assets weakens, gold prices have surged by nearly a third in 2025. Inflows into bullion-based ETFs and purchases by central banks worldwide have supported this upward trend.
With this year's stronger gold price rally, banks are offering more positive outlooks on gold. Goldman Sachs Group predicts that gold could reach $4,000 per ounce by mid-next year. Jefferies anticipates that gold will become the "only true safe asset" as investors question the credibility of US assets like US Treasuries.
Nevertheless, the recent rapid rise increases the likelihood of a correction at some point. Gold's 14-day relative strength index (a measure of speed and strength of price movements) has surpassed 79. Typically, a reading above 70 indicates an overbought asset.
In the Singapore market, as of 2:27 PM, spot gold traded at $3,484.19 per ounce, slightly down from its all-time high. The Bloomberg Dollar Index fell again after a 0.7% drop the previous day. Silver rose slightly, and palladium and platinum also increased.
The gold price surge has also boosted mining stocks. In Hong Kong, shares of Zijin Mining Group, China's largest metal producer, surged more than 6% at one point during the day, rising over 25% this year.
Guest Reporter Kim Jung-ah kja@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
