In February 2025, the global financial markets reached a critical turning point: the US dollar index surged past the 107 mark, hitting a nearly two-year high, while the price of gold fell to its lowest level since February 12. According to the latest quotes from Reuters on February 28, the spot gold price closed at $2,877.24 per ounce, a single-day drop of 1.34%; the US dollar index stood firm at 107.2926, maintaining its strong momentum for two consecutive weeks. This divergence not only reflects the interplay between Federal Reserve policy expectations and geopolitical risks but also highlights the market’s redefinition of “safe-haven assets.” A recent report from the International Monetary Fund (IMF) pointed out that the resilience of the US economy and rising global trade friction are forcing investors to reassess the value of traditional safe-haven instruments.
Since February 2025, the strong rebound of the US dollar index has become the focus of global financial markets. As of February 28, the index was at 107.2926, a slight increase of 0.0117% from the previous trading day, and has remained above the 107 mark for two consecutive weeks. This rebound reflects not only market expectations for the resilience of the US economy but also its close connection to policy trends and geopolitical risks.
The recent signals of interest rate hike expectations from the Federal Reserve (Fed) have been a key driving force. Although the market widely expects interest rates to remain in the 4.25% to 4.50% range in March, strong economic data has reinforced the narrative of “delayed rate cuts.” For example, the increase in non-farm payrolls in February exceeded expectations, and the unemployment rate remained low, indicating a persistently tight labor market, which further dampened market hopes for monetary easing.
US President Trump announced on February 26 local time that he would officially reinstate tariffs on Canada and Mexico on April 2. This move has sparked concerns about trade friction, leading to a decline in market risk appetite. Capital flowed into US dollar assets for safety, pushing the dollar index up by 0.74% in a single day, its largest gain in two months. Such policy uncertainty has exacerbated the fragility of global trade chains, indirectly strengthening the dollar’s status as a “safe asset.”
Compared to the sluggish recovery in the Eurozone and emerging markets, the US economy has shown significant resilience. In its January report, the International Monetary Fund (IMF) revised its 2025 GDP growth forecast for the US up to 2.7% and projected that inflation would fall to 3.5% by the end of the year, close to pre-pandemic levels. This “strong US, weak others” scenario provides fundamental support for the dollar.
The rise of the US dollar index has put direct pressure on gold, which is priced in dollars. On February 28, the spot gold price closed at $2,877.24 per ounce, down 1.34% for the day; COMEX gold futures also fell 1.46% to $2,887.80 per ounce, hitting a new low since February 12. This decline reflects the market’s repricing of gold’s safe-haven properties.
According to historical data, there is a significant negative correlation between the US dollar index and the price of gold. This means that when the dollar index rises, the price of gold tends to fall, and vice versa. The recent strength of the dollar has similarly squeezed the pricing space for gold, and technical selling has exacerbated the decline. Some investors chose to take profits after the gold price hit a recent high of $2,956 per ounce, further amplifying volatility.
Although the situation in the Middle East and Europe remains uncertain, the periodic easing of the Russia-Ukraine conflict has reduced market concerns about “black swan events.” A report from the World Gold Council notes that the boost to gold from geopolitical risks is often short-lived. If it does not lead to a long-term supply chain crisis, capital tends to flow back to risk assets. Additionally, the diminishing marginal market impact of internal policy disagreements in the US has also weakened gold’s appeal as a safe haven.
Despite short-term volatility, the long-term supply and demand structure of the gold market is still supported by structural factors. Continued gold purchases by global central banks and a recovery in investment demand provide a floor for the gold price.
In the fourth quarter of 2024, global central bank gold purchases reached 333 tons, a year-on-year increase of 53.6%, with Poland, Turkey, and India being the main buyers. The People’s Bank of China also increased its holdings for the 15th consecutive month, with reserves reaching 2,284.55 tons as of January 2025. This reflects countries’ efforts to hedge against the risks of US dollar hegemony and their long-term allocation demand for non-credit assets.
In 2024, global gold investment demand increased by 25% year-on-year to 1,180 tons, with ETF holdings showing net inflows for two consecutive quarters. However, speculative long positions in the options market have become more volatile, with net long positions increasing by 51,814 contracts in one week in mid-February, indicating that market sentiment remains susceptible to short-term factors. This divergence highlights gold’s dual role as both a “crisis buffer” and a “volatility amplifier.”
The IMF predicts that the US economy will slow down after 2025, while the recovery in emerging markets may reshape the relative strength of the dollar and gold. The World Gold Council points out that if geopolitical conflicts evolve into “protracted wars” (like the 2003 Iraq War), the premium effect on gold will shift from short-term to long-term. Such scenario analyses provide investors with a multi-dimensional framework for observation.
The strength of the US dollar index and the decline in the price of gold are essentially a market repricing of “risk” and “safety.” In the short term, the Federal Reserve’s policy path and the geopolitical situation will remain the dominant factors; in the long term, the multi-polarization of the global monetary system and adjustments in central bank strategic reserves will continue to influence gold’s position as the “ultimate currency.” For investors, understanding this dynamic balance is key to seeing through the fog of volatility and capturing structural opportunities.
The best time to buy gold usually depends on market volatility and the long-term trend of gold. There is no fixed “cheapest” time, but several factors can be considered:
Periods of Economic Instability: When the market or economy is unstable, investors tend to move their funds to safe-haven assets like gold, which causes its price to rise. Therefore, during economic recessions, geopolitical crises, or significant market fluctuations, the price of gold may increase.
Impact of Interest Rates and Inflation: The price of gold typically has an inverse relationship with real interest rates (i.e., interest rates after accounting for inflation). When central banks lower interest rates or inflation rises, gold becomes more attractive, and its price may go up. Conversely, if interest rates rise, gold may become less appealing.
Seasonal Factors: The price of gold can also be affected by seasonal factors. For example, India is one of the world’s largest consumers of gold, and demand increases during wedding and festival seasons (like Diwali), which can drive prices up.
Overall, to buy gold when it is cheap, you can generally pay attention to times of economic slowdown or market correction, when gold prices may be relatively low. Of course, from a long-term investment perspective, buying at a suitable price and in batches can be a more prudent strategy.
The rise in the price of gold is usually the result of a combination of various factors. Here are some of the main reasons:
1. Economic Instability and Crises
When the global economy is unstable, especially during financial crises, economic recessions, or major stock market downturns, gold attracts investors as a “safe-haven asset.” People move their capital to safe assets like gold, which drives up its demand and price.
2. Inflation Expectations
Gold is often seen as a hedge against inflation. When the market expects inflation to rise, the value of currency may decline, making gold a store of value. This leads investors to buy gold, thereby pushing up its price.
3. Interest Rate Changes
When central banks lower interest rates, the returns on traditional investments (like savings accounts or bonds) decrease, making gold more attractive. Additionally, in a low-interest-rate environment, the risk of inflation increases, and investors turn to gold to preserve value. Conversely, when interest rates rise, gold may become less attractive.
4. Currency Devaluation
When major currencies (like the US dollar) depreciate, the value of gold as a hard currency tends to rise. Many countries and investors choose to move their funds into gold to avoid losses from currency devaluation.
5. Demand and Supply
Global demand for gold also affects its price, especially with growth in demand for jewelry, industrial use, and national reserves. For instance, strong demand for gold jewelry in countries like India and China can push up market prices. On the supply side, rising costs of gold mining or limited new gold discoveries can also support the price of gold.
6. Geopolitical Risks
When major geopolitical events occur (such as wars, coups, etc.), the demand for gold as a “safe-haven asset” increases. For example, if a conflict breaks out in the Middle East, global market uncertainty increases, and investors turn to gold, driving its price up.
7. Investor Sentiment and Market Expectations
The price of gold is also influenced by investor sentiment. If the market is uneasy about the economic outlook or lacks confidence in the returns of other asset classes, a “gold rush” may occur. Furthermore, the buying behavior of large financial institutions and funds can also impact the market.
In summary, the price of gold is affected by multiple factors, with economic, inflationary, interest rate, and geopolitical factors being closely related. This gives gold a certain degree of volatility, but in times of increased global uncertainty, gold often serves as a safe haven for capital, causing its price to rise.
The definition of ‘Zu Jin’ (足金), or pure gold, varies by regional regulations. In mainland China, gold with a purity of 990 parts per thousand (99.0%) can be called “Zu Jin” or “Au990”. In Hong Kong, gold must have a purity of 999 parts per thousand (99.9%) to be called “Zu Jin” or “Au999”. There is also gold with a purity of 999.9 parts per thousand, which is known as “9999 pure gold” or “Qian Zu Jin” (千足金).
