Gold & Dollar Rise in Unison, What's Happening in Global Markets?
Global markets were surprised by an unusual movement today, when gold prices and the US dollar both strengthened simultaneously, even though these two assets generally have an inverse relationship. The increase in both reflected growing investor concerns about the economic and political uncertainty currently plaguing the United States and the global geopolitical situation.
Typically, a strong US dollar will put pressure on gold prices because the precious metal is priced in dollars. However, this time, market dynamics showed a different pattern. Global gold prices surged above US$4,160 per troy ounce, while the dollar index (DXY) also strengthened, approaching 100 points, its highest level in the past two weeks.
Analysts believe this movement is due to growing investor concerns about macroeconomic risks, including the political deadlock in Washington, which has yet to find a solution to the government shutdown, and the threat of a global economic slowdown. These conditions have prompted market participants to engage in a "flight to safety," a collective move to invest in assets considered the safest: gold and the US dollar.
"Global investors are accumulating dollars for short-term liquidity needs, while simultaneously buying gold to hedge against inflation risks and US fiscal uncertainty," explained Bloomberg senior commodities analyst Michael Ferris. "The combination of these two factors is what's causing them to rise simultaneously."
Another factor contributing to this phenomenon is the Federal Reserve's cautious stance. The market is still guessing whether the US central bank will cut interest rates at the end of October or delay it due to persistently high inflation. This uncertainty about policy direction is discouraging investors from taking risks in high-yielding assets like stocks and corporate bonds.
"As long as the Fed hasn't shown a clear direction, investors tend to stay in the safe zone. Dollars are bought for their liquidity strength, while gold serves as a long-term hedge," a Reuters report stated.
In addition to US factors, tensions in the Middle East and the ongoing Ukraine-Russia war are also strengthening demand for safe-haven assets. Global investors are shifting funds from the stock market and crypto assets to gold and the dollar, pressuring global stock indices and reinforcing the risk-off trend.
This simultaneous rise in gold and the dollar indicates that the market is facing a phase of extreme uncertainty. Both have now become a haven for global funds amid political tensions, high inflation, and the ever-looming threat of a global recession.
"When the world doesn't know what to believe, investors are relying on two things: the value of the dollar and the shine of gold," said a market analyst from the New York Mercantile Exchange.
Source: Newsmaker.id
