Gold Market: How Geopolitical Uncertainty and the Dollar Influence Prices

$GOLDUSD prices have been showing positive dynamics recently, supported by the weakening of the US dollar. On Monday, the spot price of the precious metal rose by 0.29%, reaching $2,709.26 per ounce. This growth reflects expectations tied to the potential return of Donald Trump to the White House and his upcoming inaugural address, which adds to the economic uncertainty. This article will examine the key factors influencing gold prices, as well as the impact of political and economic events on the markets.

Weak Dollar as a Factor Driving Gold Prices

One of the main factors supporting the recent rise in gold prices is the weakening of the US dollar. A weak dollar makes gold more accessible to investors using other currencies, thus increasing the demand for the precious metal.

Gold is traditionally used as a hedge against inflation and crisis situations, as well as a safe-haven asset in periods of economic instability. When the dollar weakens, gold attracts attention as a safer alternative to protect capital from inflationary risks.

Political Uncertainty and Its Impact on Gold

Expectations surrounding the potential return of Donald Trump to the US presidency add another layer of uncertainty to global markets. Trump, as in previous years, is expected to have a significant impact on economic policy, including through his statements and plans regarding tariff policy. His inaugural address may provide crucial insights into the future economic direction and its implications for inflation, interest rates, and currency markets.

If Trump's tariff policy leads to increased inflation, the Federal Reserve may keep interest rates high for longer than anticipated. This, in turn, could impact the attractiveness of gold as a non-yielding asset. However, in the short term, such uncertainties may continue to support demand for the precious metal.

Prospects for Interest Rate Cuts and Their Impact on Gold Prices

Another crucial aspect that could influence the future of gold is the prospect of changes in US interest rates. If the Federal Reserve decides to cut rates, this could positively affect gold prices, as lower rates make gold more attractive since it does not bear interest.

Unlike other assets such as bonds or deposit accounts, gold does not generate income. However, in a low-interest-rate environment, it becomes more appealing as investors seek ways to preserve capital amidst economic uncertainty.

Effect of Inflation and Interest Rates on Gold Prices

Gold is one of the primary tools for hedging against inflation, especially in times of economic crises or high uncertainty. However, if inflation prompts the Federal Reserve to raise interest rates, this could diminish the attractiveness of gold, as other assets such as stocks and bonds might begin to offer higher returns.

The long-term price dynamics of gold will heavily depend on how US authorities manage inflation risks and how quickly they can reduce interest rates.

Factors Affecting Gold Prices

1. State of the US Dollar — A weak dollar boosts demand for gold as an alternative asset;

2. Political Uncertainty — Actions and statements by political leaders like Donald Trump can significantly impact economic expectations;

3. Prospects of Interest Rate Changes — Expectations regarding interest rate adjustments affect gold's attractiveness compared to other assets;

4. Inflation — Rising inflation can stimulate demand for gold as a hedge against price increases.

Conclusion

Gold prices will continue to depend on multiple factors, including the state of the dollar, the political situation in the US, and global economic trends. Expectations tied to Donald Trump's potential return to the White House and his economic policies create additional uncertainty, which in turn supports investor interest in gold. It is also important to consider the impact of interest rates and inflation on the value of the precious metal. In the coming months, gold will remain under the influence of these factors, determining its price in global markets.