Gold prices soared to a fresh 25-year peak on Wednesday, propelled by a confluence of factors including a softening US dollar and robust investor appetite.

Market Overview

Spot gold reached its highest level since 1981, trading at $642.70 per ounce during morning trading in Europe. The weaker dollar, which makes gold cheaper for holders of other currencies, provided a significant boost.

Factors Influencing the Surge

• Dollar Weakness: The dollar’s decline against major currencies enhanced gold’s appeal.
• Investor Demand: Growing uncertainty in global markets fueled demand for gold as a safe-haven asset.
• Geopolitical Tensions: Ongoing geopolitical concerns further supported gold’s price.

Analyst Commentary

Market analysts suggest that the upward trend is likely to persist in the short term, citing continued dollar weakness and strong underlying demand. However, some caution that profit-taking could lead to temporary price corrections.

“Gold’s performance reflects broader market anxieties and the ongoing search for secure investments,” noted a senior analyst at a leading investment bank.

Gold prices climbed to their highest level in 25 years on Wednesday, fueled by robust investment demand and a softer US dollar.

Spot gold was bid at $678.10/678.90 an ounce at 1433 GMT, compared to $670.50/671.30 late in New York on Tuesday. Earlier, it touched $678.90 – its best level since June 1981.

“Investment demand is still running pretty strong and the dollar is helping,” said a trader.

The metal has risen more than 23 percent this year as investors look to gold as a safe haven from geopolitical tensions and inflation worries.

A weaker dollar makes gold cheaper for holders of other currencies.

Dealers said gold’s next target was $685 an ounce, and above that, $700.

“I think we’ll probably take a breather around $685. The next real test will be $700,” the trader said.

The dollar was under pressure after the Federal Reserve on Tuesday held interest rates steady at 5.25 percent.

Also supporting gold, holdings in the world’s largest gold-backed exchange-traded fund, streetTRACKS Gold Shares, rose to a record 528.19 tonnes on Tuesday.

Analysts said a fall in oil prices could weigh on gold, as the metal is sometimes bought as a hedge against oil-led inflation.

In other precious metals, silver rose to $12.48/12.51 an ounce from $12.35/12.38 late in New York. Platinum was at $1262/1266 an ounce from $1257/1261. Palladium was at $350/354 an ounce from $346/350.