Tensions escalate in India-Pakistan situation, spot gold prices reach $3,400 per ounce.

On Wednesday, the geopolitical tensions between India and Pakistan escalated sharply, with the Indian military announcing targeted strikes on infrastructure in Pakistan and its controlled Kashmir region, followed by Pakistan vowing retaliation. Due to the rising geopolitical risks and economic uncertainties between China and the US, the price of gold continued to rise, with spot gold reaching $3,400 per ounce, hitting a two-week high. The Indian government issued a statement saying that the action was "clearly targeted, restrained, and had no intention of escalation," and did not attack any Pakistani military facilities. Witnesses reported that after the explosions, there was a widespread power outage in Muzaffarabad, the capital of Pakistani-controlled Kashmir, and the exact nature of the explosion is still unclear. The Pakistani military spokesperson later confirmed in an interview that India had launched missile attacks on Pakistan at three locations and stated that "Pakistan will respond." This military conflict occurred as tensions between the two countries continued to escalate. Last month, an attack in the Kashmir region resulted in the deaths of 26 Hindu pilgrims, and India accused Pakistan of supporting the attackers and pledged retaliation. Pakistan denied the accusations and stated that intelligence showed India may be planning an attack. Amidst the geopolitical turmoil, a weaker US dollar, and Chinese post-holiday buying, the price of gold continued to strengthen. Spot gold once again broke through $3,400 for the first time in two weeks. After the Chinese markets reopened post-holiday, there was a significant increase in gold trading volume. According to data from the Shanghai Futures Exchange, trading volumes have reached new highs in recent weeks, reflecting strong interest from Chinese investors in gold. Adrian Ash, the research director at BullionVault, pointed out, "The current gold bull market is mainly driven by the investment frenzy in China and the demand from global central banks to reduce their US dollar assets, especially US Treasury bonds." Meanwhile, the US dollar, as a traditional safe-haven asset, has shown signs of weakness, with investors becoming increasingly cautious about the possibility of a new trade agreement being reached. Daniel Ghali, commodity strategist at TD Securities, commented, "We are seeing increased participation from Chinese speculators. In Western markets, despite high technical prices, gold is severely underweighted. Both factors are likely to support gold prices in the medium term." Since US President Trump's broad tariffs disrupted global markets, the price of gold has risen by over 25%, reaching a historical high of over $3,500 per ounce two weeks ago. Multiple investment banks and analysis institutions expect gold prices to continue rising. JP Morgan predicts that the average price of gold will reach $3,675 by the end of 2025 and could surpass $4,000 per ounce in the second quarter of next year. Ghali from TD Securities believes that gold prices could reach this level "as early as this year." Currently, investors are closely watching the Federal Reserve's interest rate decision and policy guidance to be announced this Wednesday, with any hints of future rate cuts likely to further boost the attractiveness of gold.