Gold hits record high of over $3,000 fuelled by rising geopolitical tensions
The pound is higher against the dollar in early European trading, touching $1.30, a level it had not breached since November.
The uptick is largely attributed to a weaker dollar, which has come under pressure in recent weeks. The US dollar index (DX-Y.NYB), which tracks the greenback against a basket of six major currencies, is down almost 6% from a two-year peak set in mid-January amid worries that Donald Trump's tariffs and retaliatory measures from other countries could push the US economy into a recession.
Volatility around sterling is expected this week, particularly with the Bank of England's upcoming policy meeting on Thursday.
Read more: Bank of England poised to hold UK interest rates amid Trump trade war
Investors will be keenly watching for any indications on interest rates, with expectations that the central bank will keep rates unchanged at 4.5%.
Meanwhile, sterling was lower against the euro (GBPEUR=X) on Tuesday morning, at €1.1870.
Despite forecasts predicting challenges for the euro this year, the currency has recently gained ground. A significant factor in the euro's recovery has been anticipated increases in European defence spending, which have provided support to the single currency.
Gold prices have hit a fresh all-time high above $3,000 per ounce, fuelled by escalating geopolitical tensions in the Middle East, fears of a prolonged trade war and a weakening dollar.
Spot gold climbed 1.3% to $3,025.43 per ounce, while gold futures rose 0.8% to trade at $3,028.80.
This marks a 15% gain for the precious metal since the start of the year, having closed December at $2,623 per ounce, adding to a 27% surge in 2024.
The recent decline in the dollar has played a significant role in pushing gold prices to new heights. As analysts at Deutsche Bank noted, "Investors continue to rotate away from the US dollar, seeking perceived safe havens amidst heightened policy uncertainty."
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Linh Tran, market analyst at XS.com, attributed the surge in gold prices to rising tensions in the Middle East and the ongoing US-China trade conflict. Tran explained: 'These uncertainties have not only increased demand for gold but have also pushed significant capital inflows into the precious metals market, contributing to gold reaching record-high prices.'
Australian bank ANZ reckons gold has further to climb. They say: '[For gold] we maintain our bullish view, amid strong tailwinds from escalating geopolitical and trade tensions, easing monetary policy, and strong central bank buying.'
Oil prices are higher amid escalating Middle East tensions and raising concerns over global supply stability.
Brent crude futures rose 0.9% to near $71.20 per barrel, while US West Texas Intermediate (WTI) crude climbed 1% to $68.24 per barrel. Israel launched a series of military strikes across Gaza, with the nearly two-month-old ceasefire with Hamas appearing to be quickly falling apart.
Matt Britzman, senior equity analyst at Hargreaves Lansdown (HL.L), said that concerns over supply disruptions due to ongoing conflicts in the Middle East are lifting oil. He explained: 'Israel's large-scale attack on Gaza and President Trump's threats against Iran have added to the uncertainty, while expectations of increased demand from China, fuelled by stimulus plans and strong economic data, are acting as another tailwind.'
The strikes launched by the US in response to Houthi attacks on Red Sea shipping, have also raised alarm over the stability of oil flows through this vital maritime route. A US official indicated that the military campaign could last for weeks, further intensifying fears of supply disruptions.
Trump said he would view attacks by Yemen's Houthis on shipping as equivalent to direct affronts by Iran.
Alongside geopolitical risks, stronger-than-expected economic data from China is helping to bolster market sentiment. Retail sales for January and February showed robust growth, fuelling optimism that demand could pick up in the world's largest crude importer.
However, the positive retail figures come amid rising unemployment and a slowdown in factory output, presenting a mixed outlook for China's broader economic performance.
In broader market movements, the FTSE 100 (^FTSE) was higher on Tuesday morning, up 0.3% to 8,706.24 points at the time of writing.Sign in to access your portfolio
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