In February 2025, the global financial market reached a critical turning point: the US Dollar Index surged past the 107 mark, hitting its highest level in nearly two years, while gold prices fell to their lowest level since February 12. According to the latest Reuters quote on February 28, spot gold closed at 2,877.24 USD/oz, down 1.34% in a single day, while the US Dollar Index held firmly at 107.2926, maintaining its strong momentum for two consecutive weeks. This inverse movement not only reflects the interplay between Federal Reserve policy expectations and geopolitical risks but also highlights the market’s redefinition of “safe-haven assets”. The latest report from the International Monetary Fund (IMF) pointed out that the resilience of the US economy and rising global trade tensions are forcing investors to reassess the value of traditional safe-haven tools.
Since February 2025, the US Dollar Index has rebounded strongly, becoming the focus of the global financial market. As of February 28, the US Dollar Index stood at 107.2926, up 0.0117% from the previous trading day, and has remained above the 107 mark for two consecutive weeks. This rebound not only reflects market expectations for the resilience of the US economy but is also closely linked to policy trends and geopolitical risks.
The Federal Reserve (Fed)’s recent hawkish signals on interest rates have become a key driving force. Although the market generally expects rates to remain in the 4.25% to 4.50% range in March, strong economic data has reinforced the “delayed rate cut” narrative. For example, February’s non-farm payrolls exceeded expectations, and the unemployment rate remained at a low level, indicating continued labor market tightness, further dampening expectations for policy easing.
On February 26 local time, US President Trump announced that tariffs on Canada and Mexico would be officially reinstated on April 2, triggering concerns over renewed trade frictions and lowering market risk appetite. Capital flowed into US assets for hedging, pushing the US Dollar Index up 0.74% in a single day, marking its largest daily gain in two months. Such policy uncertainty has increased the vulnerability of global trade chains, indirectly reinforcing the dollar’s status as a “safe-haven asset”.
Compared with 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) raised the US 2025 GDP growth forecast to 2.7% and projected inflation to fall back to 3.5% by year-end, approaching pre-pandemic levels. This “strong US, weak others” pattern provides fundamental support for the dollar.
The rise of the US Dollar Index has directly weighed on dollar-denominated gold. On February 28, spot gold closed at 2,877.24 USD/oz, down 1.34% in a single day, while COMEX gold futures fell 1.46% to 2,887.80 USD/oz, marking their lowest level since 12 February. This decline reflects the market’s repricing of gold’s safe-haven attributes.
Historical data show a significant negative correlation between the US Dollar Index and gold prices. This means that when the dollar rises, gold prices tend to fall; conversely, when the dollar weakens, gold prices tend to increase. The current dollar strength has similarly squeezed gold’s pricing room, while technical selling has intensified the decline. Some investors chose to take profits after gold reached its recent high of 2,956 USD/oz, further amplifying volatility.
Although uncertainties remain in the Middle East and Europe, the phased easing of the Russia-Ukraine conflict has reduced concerns over “black swan events“. The World Gold Council reported that geopolitical risks often have only short-term bullish effects on gold; unless they trigger long-term supply chain crises, funds tend to flow back into risk assets. In addition, the marginal impact of internal US policy disputes on the market has been diminishing, further weakening gold’s safe-haven appeal.
Despite short-term volatility, the long-term supply and demand structure of the gold market remains supported by structural factors. Continued central bank gold purchases and a rebound in investment demand provide a bottom support for gold prices.
In Q4 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 gold reserves for 15 consecutive months, reaching 2,284.55 tons as of January 2025. This move reflects countries’ hedging against the risks of dollar hegemony and their long-term allocation demand for non-credit assets.
Global gold investment demand in 2024 increased by 25% year-on-year to 1,180 tons, with ETF holdings seeing net inflows for two consecutive quarters. However, speculative long positions in the options market showed increased volatility, with net longs rising by 51,814 contracts in just one week in mid-February, indicating that market sentiment remains easily influenced by short-term factors. This divergence highlights gold’s dual role as both a “crisis buffer” and a “volatility amplifier”.
The IMF estimates that the US economy will slow after 2025, while emerging market recovery may reshape the relative strength of the dollar and gold. The World Gold Council points out that if geopolitical conflicts evolve into a “protracted war” (such as the Iraq War in 2003), the gold premium effect will shift from short-term to long-term. Such scenario analysis provides investors with a multidimensional observation framework.
The strength of the dollar index and the pullback in gold prices essentially reflect the market’s repricing of “risk” and “safe-haven” assets. In the short term, the Federal Reserve’s policy path and geopolitical dynamics remain dominant factors; in the long term, the multipolarization of the global monetary system and adjustments in central banks’ strategic reserves will continue to influence gold’s positioning 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 its long-term trend. There is no fixed “cheapest” time, but several factors can be considered:
Economic instability: During periods of market or economic instability, investors tend to move funds to safe-haven assets such as gold, driving prices up. Therefore, during economic recessions, geopolitical crises, or significant market swings, gold prices may rise.
Interest rates and inflation: Gold prices generally have an inverse relationship with real interest rates (interest rates adjusted for inflation). When central banks cut rates or inflation rises, gold becomes more attractive, potentially pushing prices higher. Conversely, when interest rates rise, gold tends to be less appealing.
Seasonal factors: Gold prices are also affected by seasonality. For instance, India, one of the world’s largest gold consumers, sees increased demand during wedding and festival seasons (such as Diwali), which may drive prices up.
Overall, to buy gold at relatively lower prices, it is often advisable to watch for periods of economic slowdown or market correction, when prices may be comparatively lower. From a long-term investment perspective, selecting an appropriate entry price and buying in batches may be a more prudent strategy.
Gold prices usually rise due to a combination of factors. Here are the main reasons:
When the global economy is unstable, especially during financial crises, economic recessions, or stock market crashes, gold, as a “safe-haven asset”, attracts investors. People shift funds into safe assets like gold, driving its demand and price higher.
Gold is often regarded as a hedge against inflation. When the market expects inflation to rise and currency values to fall, gold becomes a store of value. This encourages investors to buy gold, pushing its price higher.
When central banks lower interest rates, returns on traditional investments (such as deposits or bonds) decrease, making gold more attractive. In a low-interest-rate environment, inflation risks also rise, prompting investors to turn to gold as a hedge. Conversely, when interest rates rise, gold may become less attractive.
When major currencies (such as the dollar) depreciate, gold, as a hard currency, typically increases in value. Many countries and investors transfer funds into gold to avoid losses from currency depreciation.
Global gold demand also affects prices, especially with increases in jewelry, industrial, and national reserve demand. For example, strong jewelry demand in countries like India and China can push gold prices higher. On the supply side, rising mining costs or limited new gold discoveries may also support gold prices.
When major geopolitical events (such as wars or coups) occur, demand for gold as a “safe-haven asset” increases. For instance, if conflicts arise in the Middle East, global market uncertainty grows, prompting investors to turn to gold, pushing its price higher.
Gold prices are also influenced by investor sentiment. If the market feels uncertain about the economic outlook or lacks confidence in other asset classes, a “gold investment rush” may occur. Additionally, buying behavior by large financial institutions and funds can impact the market.
Overall, gold prices are influenced by multiple factors, including the economy, inflation, interest rates, geopolitical factors, etc, which are closely related. This makes gold prices somewhat volatile, but when global uncertainty increases, gold often serves as a safe haven for funds, causing its price to rise.
The definition of pure gold varies according to regional regulations. In Mainland China, as long as the gold content measured in thousandths reaches 990%, it can be called “pure gold” or “Au990″. In Hong Kong, the gold content must reach 999% to be called “pure gold” or “Au999″. There is also gold with a purity of 999.9%, which is called “9999 pure gold” or “thousand pure gold”.
