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| Dollar and Gold |
Gold Hits Record Highs Amid Dollar Uncertainty
Gold surged to new highs in February, reaching $2,951.73 per ounce on February 24. Rising inflation expectations and declining consumer confidence drove safe-haven demand, exacerbated by uncertainty surrounding U.S. trade policy. A surge in gold-backed ETF holdings also contributed to the rally, with a 2.49% increase marking the largest monthly inflow since March 2022. However, profit-taking and a stronger U.S. dollar led to a $100 pullback, with gold closing at $2,857.83 per ounce on February 28, still securing a monthly gain of 2.12%.
Investor Sentiment and Market Performance
Gold miners, represented by the NYSE Arca Gold Miners Index (GDMNTR), gained 2.01% in February, underperforming bullion but still surpassing broader equity markets. At the BMO Metals and Mining Conference, industry leaders noted increased investor interest in gold equities, driven by rising gold demand and ETF inflows. Companies reported a growing number of meetings with general investors looking to diversify their portfolios with gold exposure.
Gold’s Resilience Amid Global Tariffs
Unlike many industries impacted by global tariffs, gold producers may benefit from foreign currency depreciations. Companies such as Alamos Gold, with significant operational costs in Canadian dollars and Mexican pesos, could see margin expansion due to currency fluctuations. While industry-wide cost inflation is projected at 3-5% in 2025, rising gold prices and weaker local currencies may offset these pressures, strengthening profitability.
Erosion of Confidence in the U.S. Dollar
For decades, the U.S. dollar has been the foundation of global trade and finance. However, recent trends indicate a slow but steady shift away from dollar dominance. Factors such as aggressive sanctions, asset freezes, and growing fiscal concerns in the U.S. have led nations to diversify their reserves. Since the 2008 financial crisis, central bank gold purchases have accelerated, particularly after the Russia-Ukraine conflict. China has been reducing its U.S. Treasury holdings while increasing gold reserves, signaling a broader move toward gold-backed financial stability.
A New Gold Bull Market?
Historically, gold bull markets have been driven by runaway inflation, a weakening dollar, or financial crises. The current rally, which began in 2016, is unique in that it is not directly linked to any of these factors. Instead, it reflects a gradual loss of confidence in the dollar as a store of value. With global uncertainty persisting and digital assets like Bitcoin reaching six-figure valuations, gold’s potential for further price appreciation remains strong. A continued shift in investor sentiment could propel gold prices higher than many analysts currently anticipate.
