Chaos drove gold to peaks

Gold has experienced a dramatic six-month run marked by significant price swings and geopolitical uncertainty, culminating in a historic rally to all-time highs. According to Adnan Agar, Director of Interactive Commodities, gold opened around $2,750 in November, briefly dipped to $2,500 and then surged to a peak of approximately $3,500, a long-expected milestone.

In Pakistan, the bullion jumped from Rs295,000 to Rs350,000 before receding to around Rs346,000. The major factor that impacts the Pakistani gold market is international trends.

This almost $1,000 movement reflects both investor anxiety and opportunistic buying amid a volatile global backdrop.

A key driver of the rally has been gold's enduring status as a safe-haven asset. Heightened geopolitical tensions — from the Russia-Ukraine war and the Israel-Hamas conflict to flare-ups between the US and Iran — have prompted risk-averse investors to shift capital into gold. Notably, the period between January and April 2024 saw especially strong gains, with gold rising by about $600-$700, according to market estimates. The uncertainty sparked by Donald Trump's presidential comeback and tough tariff rhetoric further intensified market jitters, sending gold prices higher.

However, by late April, the rally began to lose steam. After touching highs of $3,276, gold retraced to $3,215, reflecting a broader pullback. This dip was partly technical, triggered by a break below key support levels (noted around the 60-70 mark), and partly driven by the resurgence of US equities. Strong corporate earnings and a revived US stock market have diverted attention away from gold, reducing its short-term appeal.

Beyond investor behaviour, structural factors have played a critical role. Central banks, particularly in China, Turkey, and Poland, have continued aggressive gold buying. The World Gold Council reports that China added to its reserves for the 17th straight month in April 2024, reinforcing gold's position in ongoing de-dollarisation efforts. This institutional demand has added a solid floor to gold prices even during brief corrections.

Speculation about US Federal Reserve interest rate cuts has also supported gold. A weaker dollar, driven by anticipated monetary easing, has made gold more attractive globally. The Wall Street Journal noted that traders priced in multiple Fed cuts throughout 2024. However, stronger-than-expected US economic data periodically cooled this sentiment, contributing to the market's uneven trajectory.

Emerging risks could continue to influence price direction, said Adnan Agar. One potential flashpoint is the growing tension between India and Pakistan. Any escalation toward open conflict would likely send gold surging by another $100-$150, reaffirming its safe-haven status in turbulent times.

Meanwhile, retail trends are mixed. Indian gold demand has softened due to high prices ahead of the wedding season, while Chinese retail investment in bars and coins remains strong. Additionally, the approval of spot Bitcoin ETFs in January 2024 diverted some speculative interest away from gold, although it remains a core holding for conservative investors.

Finally, the gold mining sector faces rising costs and operational challenges, as reported by Mining.com and the New York Times. These supply-side constraints may limit future output, potentially placing upward pressure on prices if demand remains elevated.

In sum, gold's recent trajectory reflects a complex interplay of geopolitical anxieties, central bank strategies, retail trends, and broader macroeconomic shifts. The outlook remains bullish—albeit volatile—as markets weigh risk, policy, and global stability.