— Gold reaches an all-time peak of $3,057.21 per ounce.

Lagos — Gold has been hitting unprecedented peaks for the past three days consecutively, with spot prices climbing up to $3,057 per ounce today. .

Gold's increases followed Jerome Powell's address, which seemed to align with investor wishes in multiple ways, as he refrained from adopting an aggressive stance and highlighted the ambiguity caused by trade tariffs. .

Powell's positive remarks were part of a series of elements driving gold prices higher. Among these, increasing worries over the possible consequences of Donald Trump’s trade policies and the economic instability caused by delaying tariff implementations stood out as key drivers for gold's sustained upward movement. .

After announcing the choice to maintain present interest rates without change, the subsequent discussion centered around tariffs, influencing monetary policy makers' outlooks. Even with the disruptions created by these tariffs, Federal Reserve members notably reduced their forecasted U.S. economic growth for the ongoing year down to 1.7%, from an initial prediction of 2.1%. Additionally, the address didn’t adopt an aggressive stance that might have sparked worries over extended periods of tighter policies beyond anticipation. It was noted too that committee participants believe the effect of tariffs would only last momentarily—even though they may briefly obstruct attempts at steering inflation toward its targeted level—with most projecting support for two reductions in rates within the same year.

In the end, Powell's address and the Federal Reserve’s economic projections didn’t alter market expectations regarding the course of monetary policy. The chances still favor us seeing anywhere from two to three interest rate reductions this year, which could enable gold prices to keep rising over time.

The likelihood of this year’s meetings concluding with a 75-basis point reduction exceeds 50%, placing it beneath the central forecast provided by policymakers, as indicated by the CME FedWatch Tool.

Regarding monetary policy, the Federal Reserve plans to reduce the rate at which it decreases its asset holdings (referred to as the balance sheet) beginning in April, lowering it from $25 billion to $5 billion per month. This strategic move aims to prevent potential disruptions in the money markets due to a liquidity shortfall expected after the planned hike in the debt ceiling. .

A more gradual reduction in the balance sheet could decrease how quickly the Federal Reserve decreases its demand for Treasury securities. Consequently, this might aid in keeping yields low, thereby providing additional support. gold .

In terms of economics, Fitch Ratings reduced its worldwide economic growth projection from 2.9% to 2.3% for 2025, and cut its U.S. economic growth outlook from 2.1% to 1.7% for the same year, followed by a reduction to 1.5% from 1.7% for 2026. The ratings firm attributed these changes to the ongoing U.S. trade conflict, potentially underscoring the adverse effects of tariffs. This situation could fuel greater demand for safer assets as well.

Supply chain disruptions might not just stem from tariffs; they could also face new challenges due to escalating tensions in the Middle East, which may cause temporary issues. Over the past few days, we've seen an extraordinary intensification of U.S. actions in Yemen, along with warnings that Iran will be held accountable for providing military backing and launching assaults through the Houthi rebels. This situation raises fears of a more extensive conflict in the region and has bolstered gold prices since earlier this week. .

On the contrary, should there be any disturbance to shipping in the area, I think this disruption would be short-lived, considering Iran’s current frailty—likely to intensify under Trump’s Maximum Pressure campaign—and the blockade faced by the Houthis. .

* Samer Hasn, Senior Market Analyst at XS.com