Commodities Watch: Where’s next for gold prices?

Gold prices push further into record high territory

Gold has surged past the US$3,250 level in today’s session, extending its rally to yet another record high. Despite increasingly overbought technical conditions in the near term, momentum shows little sign of slowing.

In a volatile environment where viable investment alternatives are scarce, gold continues to shine — especially as the US dollar struggles to hold its safe-haven appeal amid potential capital outflows and growing uncertainty around US growth.

Assessing the catalysts behind gold’s surge–Can the rally be sustained?

Gold prices’ ascent may be fuelled by the following key factors:

1. Weaker US dollar, driven by Euro strength

The US dollar index has been dragged to a three-year low, pressured by expectations of a more dovish Federal Reserve (Fed), rising growth risks, and ongoing divestment from US assets amid heightened uncertainty. A resurgent euro has played a key role in this broad-based dollar weakness, providing a tailwind for gold. A softer greenback typically lifts demand for gold among non-dollar holders.

View: The dollar’s break to a three-year low seems to put a bearish bias in place, with intermittent bounces proving to be short-lived. From a technical standpoint, key support may emerge around the 96.50 level, where a broader rising trendline comes into play. This setup points to further downside potential for the dollar—and, by extension, further support for gold.

2. Safe-haven flows amid geopolitical risk and tariff uncertainty

US President Donald Trump’s flip-flipping tariff stance continues to inject uncertainty into the policy outlook and economic environment. Coupled with persistent downside surprises in US economic data over the past month, investors are increasingly seeking refuge in gold as a hedge against portfolio volatility.

View: The ongoing gridlock between US and China is likely to drag on for longer, with both sides showing little signs of resolution intent thus far. Until market participants are convinced that they have seen the worst in trade tensions between the two economic superpowers, gold may remain an attractive hedge against any unexpected volatility.

3. Lingering stagflation concerns

While not dominant, slight stagflation concerns—marked by sticky inflation and slowing growth—are simmering in the background. This scenario has historically boosted performance in real assets like gold. These risks were reflected in the Fed’s March economic projections and the recent US consumer sentiment data.

4. Global rate-cutting cycle lowers opportunity costs

More global central banks continue to head into a rate-cutting cycle, with the ongoing shift in monetary policy landscape boosting gold’s appeal relative to interest-bearing alternatives.

5. Resilient central banks’ buying

Central banks remain consistent buyers of gold, largely driven by ongoing efforts to diversify away from the US dollar. According to the World Gold Council, net purchases remain steady at the start of the year, with emerging market central banks leading the trend. This persistent demand provides structural support for gold prices.

View: Recent data from MacroMicro shows that the share of gold in global central banks’ official reserves has risen above 12% in 2024—the highest level since 1993. If emerging economies aim to catch up with developed markets, where gold accounts for around 28% of reserves as of 2024, there remains significant room for further central bank purchases—a structural tailwind for gold prices.

6. Modest pick-up in ETF inflows

Exchange traded fund (ETF) flows have been lagging behind the pace of gold’s price gains over the past years, but are starting to see signs of a stronger pickup in 2025. The increased interest from institutional and retail investors seeking exposure to gold’s upside through ETFs may help to offer another source of demand for gold. For now, there looks to be further room for catch-up ETF buying to play out, with current holdings in the SPDR Gold Trust ETF—the largest gold ETF in the world—still well below their 2020 peak.

Where are the risks?

One key risk is that the US 10-year real yield remains persistently elevated at around 2.15%—similar to levels seen in September 2023. This suggests that real yields have yet to ease meaningfully, even with the Fed in a rate-cutting cycle. Persistently high real yields could act as a headwind for gold, and a more notable decline may be needed to provide stronger support for prices.

Additionally, the sharp run-up in gold has made net-long positioning appear increasingly crowded. This raises the risk of a short-term pullback if sentiment shifts. Waiting to buy on dips may offer a more prudent entry point and help avoid getting caught in a potential unwinding.

Technical outlook:

The recent push to a new higher high keeps the broader uptrend intact, with the daily relative strength index (RSI) rebounding off its midline, which reinforces the bullish momentum. The 261.8% Fibonacci extension (drawn from the 2018 low to the 2020 high) points to the US$3,500 level as a potential upside target to watch ahead. However, given the steep pace of the recent rally, buying on pullbacks may offer a more prudent entry. A return of the RSI toward neutral levels could be a signal to watch for consolidation or renewed entry. On the downside, immediate support stands at the US$3,165 level—a horizontal resistance-turned-support level.