Why is Gold Already Above $5,200?

[Ben Graham]

The price of gold has soared to a new historical high, surpassing $5,200 per troy ounce, continuing its upward trend driven by the weakening positions of the American currency.

Since the beginning of the year, the precious metal has demonstrated impressive growth, rising about 20%, and for the first time this week, it crossed the psychological $ 5,000-per-ounce mark. Silver, during the same period, has shown an even more substantial jump, appreciating by more than half.

The increase in gold prices is driven by concerns about the US dollar's depreciation. The instability of the global economy and the active printing of the American currency are fueling investor interest in this traditional safe-haven asset. Unlike fiat currencies, gold has intrinsic value and is not subject to inflationary risks, making it an attractive means of capital preservation during periods of economic turbulence.

Trump's tariff policy has reignited speculation that global central banks might reduce their holdings of US government bonds and diversify their currency reserves by acquiring gold. Protectionist measures and Trump's trade threats also raise doubts about the stability of the American economy and the reliability of the dollar as a reserve currency. For this reason, central banks, seeking to protect their assets from political risks, are increasingly turning to gold as an alternative investment instrument.

Additionally, geopolitical risks traditionally drive investors to acquire safe-haven assets, among which gold certainly ranks. The likelihood of a US attack on Iran prompts traders and investors to continue buying gold to protect themselves from shocks that could affect the global economy.

The escalating tensions in the Middle East are creating fertile ground for gold's rising price. Investors fear not only direct economic consequences of war, such as a spike in oil prices and disruptions to trade relations, but also broader, unpredictable repercussions for the global financial system.

Moreover, the psychological factor should be considered. When news of possible conflict dominates the headlines, investors tend to adopt more conservative strategies and seek to protect their assets. As a result, demand for gold rises, inevitably driving its price higher.

However, it is important to remember that geopolitical risks are temporary. If tensions between the US and Iran decrease, the price of gold may correct. Hence, investors should closely monitor developments and make informed decisions based on a thorough analysis of the situation.

As for the current technical picture of gold, buyers need to overcome the nearest resistance at $5,317. This will allow them to target $5,416, above which it will be quite challenging to break through. The further target will be around $5,526. If gold falls, bears will try to take control of $5,223. If they succeed, breaking through this range will deliver a significant blow to the bulls' positions and push gold down to a low of $5,137, with the prospect of falling to $5,051.

The material has been provided by InstaForex Company - www.instaforex.com