For the first time in history, gold has reached $2,100! The price of gold is driven by a dual catalyst of the Federal Reserve's policy shift and geopolitical risks.

Zhitong App noticed that the gold price has reached a historic high due to fund buying, speculation on the Federal Reserve's policy shift, as well as geopolitical and financial risks supporting the rise in gold prices. The price of gold rose to $2,141.79 per ounce at one point, then retraced its gains. The high point on Tuesday exceeded the record of $2,135.39 set over three months ago. Driven by expectations of monetary easing, geopolitical tensions, and the risk of stock market pullback, gold prices have risen by over 4% since last Thursday. Ryan McKay, a commodity strategist at TD Securities, stated that momentum buying from macro funds and commodity trading advisors has fueled the uptrend. The scale of this move has surprised some market observers, especially as market expectations for a Federal Reserve shift to loose policy or other macroeconomic drivers have not significantly changed during this period. James Steel, an analyst at HSBC, said, "The speed is very sudden, very fast." "There seems to be no concrete evidence." Ole Hansen, a commodity strategist at Saxo Bank, mentioned that the risk of a stock market pullback is increasing - as indicated by the weak US manufacturing data released last Friday - which may have convinced some investors to exit the stock market and turn to gold. Although the timing of the Federal Reserve's shift remains uncertain, signs since mid-February suggest that it is getting closer to the target, providing support for gold prices. The futures market indicates a 64% probability of a rate cut in June, higher than the previous month. Lower borrowing costs are usually favorable for gold as gold does not offer any interest. Macro funds, which have only recently become active in the gold market, are a new buying force in the rise of gold prices. The latest data from the US Commodity Futures Trading Commission shows that as of February 27, hedge funds and fund managers increased their net long positions in gold. However, it is worth noting that the increase in short positions by these investors is roughly in line with the new long positions, indicating market uncertainty, as mentioned by McKay of TD Bank. HSBC's data shows that option-related buying above the $2,100 strike price has also boosted gold prices. Gold ETF The recent rise in gold prices also highlights the increasing disconnect between spot prices and ETF outflows supporting gold. Data shows that holdings of the world's largest ETF, SPDR Gold Shares, fell by 0.3% on Monday, bringing its holdings to the lowest level since July 2019. These outflows are somewhat offset by the continued demand for gold from central banks. Despite the surge in real interest rates last year, this demand has helped keep gold prices high. Physical demand for gold bars and coins has also absorbed gold leaving ETFs. Gold was also supported during the Spring Festival as Chinese consumers sought to hedge against the Chinese stock market and real estate industry. In the first few months of this year, the rising geopolitical risks have highlighted the role of gold as a safe-haven asset, with the attack on the Red Sea shipping indicating the escalating tension in the Middle East. The end-of-year U.S. presidential election has made it a potential source of instability. Ewa Manthey, a commodity strategist at ING, said, "Speculation about the Fed's interest rate shift and the ongoing geopolitical tensions have kept gold shining." "We expect gold prices to rise this year, as the backdrop of ongoing wars and upcoming U.S. elections, among other geopolitical uncertainties, will continue to support safe-haven demand." Bitcoin Sets Records However, gold still has a long way to go to reach its peak value adjusted for inflation more than 10 years ago. Since the turn of the century, gold prices have risen by over 600%, but after adjusting for inflation, they are still below the high of $850 reached in January 1980, which would be equivalent to over $3,000 in today's dollars. While gold prices hit historic highs, Bitcoin has also surged to record levels. Ryan McIntyre, Senior Portfolio Manager at Sprott Asset Management, said that although some investors are seeking safety in both assets, "it is still too early to judge whether Bitcoin is a safe haven."