Still, future gains are never promised and not everyone agrees gold is a good investment. Critics say gold isn’t always the inflation hedge many say it is — euro to norwegian krone exchange rate and that there are more efficient ways to protect against potential loss of capital, such as through derivative-based investments. Among sources of uncertainty today are geopolitical tensions — which escalated over recent days with Israel’s deadly strikes in Lebanon.
Gold jumps to record above $2,460 an ounce on hopes Fed will soon cut rates
The BoJ rate-hike uncertainty, the convert australian dollar to new zealand dollar upbeat market mood and elevated US bond yields cap the JPY. The USD climbs to a fresh year-to-date high and offers additional support to the USD/JPY pair. The chances of an additional quarter-point rate cut next month stand at more than 90%, according to the CME FedWatch Tool, a measure of market sentiment. China ranks atop the list of nations seeking to bolster their gold reserves as a means of reducing its dependence on the U.S. dollar.
- Some experts also attributed the rise in gold prices to geopolitical uncertainty and unease surrounding the coming U.S. presidential election.
- Still, the gold price continued to soar in recent months as investors grew increasingly confident that the Fed would cut interest rates.
- Gold may offer hedging benefits against potential geopolitical shocks, including potential rises in trade tensions, Federal Reserve subordination risk, and debt fears.
- The BoJ rate-hike uncertainty, the upbeat market mood and elevated US bond yields cap the JPY.
METALS BEARISH THEMES
Over the past five years, the price of gold has appreciated approximately 36% while the total return of the S&P 500 has been 60%. Lindahl said that “trend followers” and others jump on the rise in prices as the background begins to point to substantially higher prices over the long term. The company may now be selling as much as $200 million in gold and silver each month, according to an estimate by Wells Fargo. Chief Financial Officer Richard Galanti told analysts in December that the company had sold more than $100 million of gold bars in the prior quarter.
Below, we'll take a closer look at what's behind gold's rising price trend and just how high the price of gold will go. Indeed, investors are turning to the safety of gold in large numbers, driving its price to an all-time high of $2,125.89 this past December. That mark was surpassed earlier this month with gold trading at $2,160 per troy ounce, and most recently, gold's price hit $2,170.16 on March 22. UBS sees the expectation of Fed rate cuts as “still the main driver for bullish sentiment toward gold,” according to an April 9 research note. Higher oil prices meet the frugalwoods are likely to stoke concerns over inflation, boosting gold prices, according to the UBS research note.
Crude Oil tries to claim $70 as geopolitics supports price
Heightened geopolitical uncertainty over that period also made gold an attractive place for safe-haven investment, some experts said. They also pointed to purchases of gold reserves among central banks, as well as persistent demand from investors aiming to diversify their portfolio and hedge against global unrest. "The recent surge in gold prices is primarily driven by softer U.S. economic indicators," says Croak.
The precious metal has increased more than 20% this year, peaking at a record of more than $2,500 per troy ounce. Goldman Sachs Research forecasts the price will reach $2,700 by early next year, buoyed by interest rate cuts by the Federal Reserve and gold purchases by emerging market central banks. The metal could get an additional boost if the US imposes new financial sanctions or if concerns mount about the US debt burden. Recent gains for the precious metal are largely credited to ongoing economic uncertainty, geopolitical tensions and strong demand from central banks around the world. Gold rallied to record highs in the first half of 2024 on the back of a multi-year spike in demand from central banks around the world, as mounting global geopolitical risks boosted interest in the safe haven asset. According to UBS, central bank buying of bullion is the highest it’s been since the late 1960s.
Metals Big Picture
If this ratio is about to turn, or at key levels where it could turn, the trader looks to the Equity indices if the risk has indeed been on and if it is about to turn as well. A potential re-election of former President Donald Trump could involve a 10% tariff on foreign goods and a four-year plan to reduce essential Chinese imports. This could complicate the Federal Reserve's task of lowering inflation to the 2% target and strain relations with China, negatively affecting Gold's demand outlook. The Russia-Ukraine conflict in 2022 and the Israel-Hamas dispute in 2023 underscored Gold's appeal as a safe-haven asset in uncertain times. Further escalation in the Middle East or a resurgence of the Russia-Ukraine conflict may push Gold prices higher.