According to data from the London Stock Exchange (LSEG), in early trading on Tuesday (March 5th) in New York City, spot gold prices briefly touched $2141 per ounce, breaking the record of $2135 set in December last year. As of publication, spot gold prices have fallen to around $2131.
Weekly chart of spot gold
Since the beginning of the year, the price of gold has risen by over $60. Looking further, gold has been on a hot rise for 16 months, rising by 30% from its level of $1600 in mid-2022. Media analysis suggests that the rise in gold is mainly driven by factors such as the reignition of expectations for a rate cut by the Federal Reserve, investors seeking safe haven assets, and continuous buying by central banks around the world.
It is worth mentioning that the current benchmark interest rate of the Federal Reserve is at a 22 year high of 5.25% to 5.5%, which would have strengthened the strength of the US dollar and weakened the attractiveness of gold. Analysts say that this environment has made gold's new record high even more valuable, reflecting the surprisingly strong market demand for this precious metal.
It should be pointed out that although gold has reached a nominal historical high, there is still some distance from the inflation adjusted historical high of $3355 in 1980.
Last Friday, the data released by the American Institute of Supply Management (ISM) showed that the contraction of manufacturing activity in February was significantly larger than expected, making gold break through the "triple top" near the $2070 threshold - the new high recorded during the COVID-19, the Russia-Ukraine conflict and the U.S. banking crisis.
The analysis said that the weaker than expected economic data led the market to raise the expectation of the Federal Reserve to cut interest rates in June. Traders believed that the bank's probability of implementing the "first reduction" before June reached 85%, which was also reflected in the yield of US treasury bond bonds, which closed at a new low of half a month yesterday.
James Steel, a precious metals analyst at HSBC, believes that the constantly changing expectation of interest rate cuts may not be the main driving force behind gold's recent surge. Some new entrants in the market are seeking gold as a safe haven, while others are taking advantage of uncertainty to operate. Steel predicts that gold may experience a decline like last December.
Bitcoin has also reached a new high
After nearly two hours of gold hitting a new high, according to Coin Metrics, the price of Bitcoin briefly reached $69210, breaking the record of $68982.20 set on November 10, 2021. But it clearly fell afterwards, with the latest price at $65138.
Bitcoin monthly chart
Alex Thorn, research director at Galaxy Digital, said, "Bitcoin has once again hit a historic high, indicating that it will never disappear. In its 15 years of existence, Bitcoin has experienced four drawdowns of over 75%, but each time it has rebounded significantly."
Clara Medalie, the research director of cryptocurrency provider Kaiko, also agrees with this view, stating that the new record is an "important psychological milestone" that demonstrates "the extraordinary ability of cryptocurrencies to rebound and continue to persist in the face of enormous resistance.".
Market insiders believe that this round of upward trend is mainly due to the approval of Bitcoin spot ETFs in January and the impact of Bitcoin's imminent halving. As a built-in feature of Bitcoin, halving production once every four years will reduce the number of new Bitcoins miners receive. Previously, every time Bitcoin was halved, it would cause a certain degree of price increase in the market.
