| World gold price hits 2,300 USD/ounce, domestic 999.9 gold ring sells for 72.32 million VND/tael World and domestic gold prices both plummet, 999.9 gold ring falls below 72 million VND/tael |
Gold, the safe-haven asset, has been buoyed as conflicts around the world show little sign of abating and the four-year wait for interest rate cuts in the US and UK continues.
On 6 April, gold was trading at nearly $2,250 (£1,788) per troy ounce, reaching $2,288 (£1,818). On 7 April, another all-time record followed the record days set in January, February and March this year. But why is the price of gold still rising?
First, geopolitical conflicts have attracted investors to gold. The wars in Ukraine and Gaza continue, and the risk of an escalation to other countries hangs over the market. Investors and governments are wary of another outcome like the one that occurred in Ukraine two years ago, and gold is one of the best hedges against these concerns.
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Data from BullionVault, the world’s largest online precious metals marketplace, shows that Western investors made record profits from selling gold in March, selling nearly twice as much as they bought. Previous peaks in the number of gold sellers also came as bullion prices soared, said Adrian Ash, director of research at BullionVault.
But they all coincided with periods of heightened political or financial stress, driving investor demand even stronger. Indeed, the number of sellers through the platform has increased by 95%, beating the numbers seen during the UK riots and the Euro debt crisis in 2011, the Ukraine war in March 2022, and the shock of the Brexit referendum in June 2016.
In contrast, gold's new all-time high has increased exponentially as the general uncertainty surrounding global conflicts continues. That speaks to the underlying strength of this bullish trend.
Second, central banks continue to buy gold. Strong demand from central banks and retail investors in Asia is also supporting the yellow metal. However, demand is expected to decline in the short term as investors shy away from higher prices.
Strategists say the prospect of lower funding costs could eventually lead to demand for bullion-backed exchange-traded funds (ETFs) from real-money asset managers for the first time since 2022. And while the pace of purchases is slowing, central banks around the world are still stockpiling gold where they can.
Global central bank gold reserves rose by 19 tonnes in February, according to the World Gold Council. While it was the ninth consecutive month of growth, the data showed a slowdown, with purchases down 58% in the month compared to January. Year-to-date, central banks reported adding 64 tonnes in January and February, down 43% from the same period in 2023 but up fourfold in 2022.
Third, gold as a hedge against inflation. Gold rallies when inflation tends to rise, devaluing currencies. However, Federal Reserve Chairman Jerome Powell’s policy outlook update will be a key driver for stocks and commodities this week. The Fed won’t cut interest rates until June at the earliest, and annual inflation is running at 2.5% as the economy grows.
The strength of the US dollar is complicating matters for those interested in gold’s future. The currency just hit a four-month high, adding pressure to the gold market and confusing those with exposure to bullion.
Kathleen Brooks, director of research at XTB Trading, pointed out that gold may have hit its ceiling absent a corrective event such as further geopolitical escalation and could be due for a correction. Open interest in gold contracts appears to have peaked, with the price of gold now sitting 15% above its 200-day moving average (SMA).
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