Gold is on the verge of an unprecedented eighth consecutive monthly gain, the longest streak in its history, with prices surging to near $5,100 per ounce. This historic rally is being driven by a potent combination of renewed trade protectionism, escalating geopolitical tensions, and fragile macroeconomic fundamentals, creating a complex environment for all risk assets, including cryptocurrencies.
The rally faces significant headwinds despite its momentum. Chief Economist at Moody's Analytics, Mark Zandi, warns that financial markets feel increasingly fraught, with the elements for a meaningful selloff coming into place. "Valuations are high…investors are simply investing on the faith that prices will rise quickly in the future because they have in the recent past," Zandi stated. He points to mixed economic data: US real GDP is growing just over 2%, below the economy's potential, while employment has flatlined and unemployment creeps higher. Inflation, measured by the Fed's preferred PCE deflator, remains stubbornly high, with December Core PCE rising to 3.0%, its highest since November 2023.
Two primary catalysts are fueling the intense safe-haven demand. First, former President Donald Trump's announced sweeping new tariff packages on imports from key trading partners has rattled markets, sparking fears of inflation, supply chain disruptions, and retaliatory trade wars. "The tariff announcement acts as a direct catalyst for gold," notes Dr. Anya Sharma, Chief Commodities Strategist at Global Markets Insight. Second, delicate diplomatic talks between the United States and Iran are introducing short-term volatility and a "geopolitical risk premium" into the market. "Any negotiation of this magnitude introduces a binary risk scenario," explains geopolitical risk consultant Michael Chen.
The demand is broad-based and measurable. Exchange-traded funds (ETFs) backed by physical gold have reported their largest weekly inflows in over two years. Futures market data shows a sharp increase in institutional net-long positions, and retail demand for physical bullion has spiked globally. Notably, central banks now hold more gold than US Treasuries in reserves for the first time since 1996. A severe post-Chinese New Year gold shortage in China, with shops halting bar sales, is adding further bullish momentum, with some analysts suggesting extreme scenarios could push gold toward $10,000 per ounce.
The rally's impact extends beyond traditional markets. Zandi explicitly warned that the threat of a selloff is highest for stocks and corporate bonds, "but even crypto, gold, and silver remain at risk despite recent pullbacks." The Treasury market adds another layer of uncertainty, with Zandi warning that leveraged hedge funds in a fragile market could "run for the proverbial door all at once, and interest rates spike." Technical analysts note key resistance for gold near $5,160 and highlight the critical $5,100 level. The current strength in gold is occurring alongside U.S. dollar resilience, breaking the typical inverse correlation and signaling exceptionally strong, fundamentally-driven buying pressure.
