5 reasons to invest when gold is still "expensive as hot cakes"

On May 9, local time, the US Department of Labor announced that the number of applications for unemployment benefits in this country increased by 22,000 to 231,000 last week. The number of Americans filing for benefits is higher than expected, reinforcing investors' hopes that the US Federal Reserve (FED) will cut interest rates by the end of 2024.

Expectations of interest rate cuts from the Fed will be the main reason for boosting gold prices this year. Photo: Bloomberg

The dollar fell against a basket of currencies following the announcement, with the dollar index down 0.17% to 105.363. However, the cheaper dollar boosted demand for gold among foreign investors. Spot gold rose 0.2% to $2,350.81 an ounce this morning, its biggest gain in five weeks, according to Reuters. Gold futures rose 0.7% to $2,356.90 an ounce.

“Gold has regained its footing this week on the back of worse-than-expected jobless claims data, suggesting the job market may be starting to loosen,” said Tim Waterer, chief market analyst at KCM Trade in Australia. Upcoming inflation reports could alter the timing of expected rate cuts, and gold could be a beneficiary, he added.

In fact, investors' expectations about the likelihood and timing of Fed rate cuts are having a big impact on the gold market, as lower interest rates reduce the opportunity cost of holding gold. According to CME FedWatch, traders are currently pricing in a 67% chance of a US rate cut in September 2024. However, Fed representative, San Francisco branch president Mary Daly said that the US inflation situation in the coming months is extremely unclear, according to Reuters.

According to Mint, expectations for Fed policy will be the most important factor in the five reasons to invest in gold this year. Although the Fed has maintained a relatively hawkish stance on monetary policy, recent easing from the agency has reinforced expectations of a rate cut later this year. Commenting on this, a representative of the financial company Religare Broking (India) said: "The possibility of a rate cut in the second half of this year will likely cause the USD to depreciate, thereby acting as a positive catalyst for gold prices."

Another important reason to invest in gold is high inflation, especially in the US. “Given gold’s traditional role as a hedge against inflation, it is expected to remain attractive to investors in the coming months,” commented a representative of Religare Broking. In fact, recent economic data in the US also showed that inflation has been falling more slowly than expected. The latest US consumer price index report showed a 3.5% year-on-year increase to 312.33 in March 2024, following a 3.2% increase in February.

The third reason to invest in gold comes from rising political tensions around the world. In 2024, the world of gold will be affected by the war in the Middle East, as Israel is increasing tensions with Syria and Hezbollah in the north, and Hamas in the south of the region. Furthermore, the prolonged war between Russia and Ukraine can also boost gold investment, due to its reputation as a safe investment channel in the context of war.

Slowing global economic growth will also boost investment demand for gold, which is all the more attractive amid market uncertainty, according to Religare Brooking. The global economy could see a pessimistic outcome by the end of 2024, with gross domestic product (GDP) growth at its slowest in half a decade over the past 30 years, according to the World Bank's latest Global Economic Prospects report. Global growth in 2024 is forecast to slow for the third consecutive year, falling to 2.4% from 2.6% in 2023.

The final reason to invest in gold comes from the demand from global central banks for gold, which will drive up the price of gold. These institutions have long considered gold an important part of their financial reserves, especially as diversification of supply becomes increasingly important. Currently, central banks hold about 20% of global gold production. In the first quarter of 2024, central banks bought nearly 290 tons of gold, surpassing the previous year's record, with China leading the way, followed by Türkiye and India.

The World Gold Council's Q1 2024 report highlighted a 3% increase in global gold demand to 1,238 tonnes, the strongest first quarter since 2016. The growth was largely driven by strong over-the-counter (OTC) investment activity and consistent central bank purchases. Bar and coin demand also increased by 3%.

Forecasting the future price of gold, Mr. Rahul Kalantri, Vice President of Mehta Equities Investment Company (India) told Mint: "The lowest price of gold this year will be around 2,278 - 2,294 USD/ounce, and the highest will be around 2,328 - 2,342 USD/ounce".

According to analysts at Religare Broking, although investors are hesitant to buy gold at this stage, if the world gold price slightly decreases to 2,235 - 2,240 USD/ounce, this could be a favorable opportunity to buy gold in the coming time.

World gold price chart at 15:49 on May 10, 2024

The world gold price today, May 10, 2024, continues to increase strongly. Specifically, at 3:49 p.m., the gold price was at 2,368.19 USD/ounce, up 22.49 USD (equivalent to 0.96%) compared to the previous opening session.

Gold price list of Saigon Jewelry Company Limited SJC at 14:12 on May 10, 2024

Similarly, the domestic gold price today also continued its record "stormy" increase. At 2:12 p.m., the listed gold price of Saigon Jewelry Company Limited (SJC) was VND90.1 million for buying and VND92.4 million for selling. Compared to the same time yesterday, the SJC gold price had a "huge" increase of more than VND3.1 million for buying and selling.

Giving reasons for the record increase in domestic gold bar prices, experts said that the main reason is the sharp increase in demand for gold bar investment. According to statistics from the World Gold Council, Vietnam's gold investment demand in the first quarter increased sharply by 12% in the first quarter of 2024, the highest since 2015.

In addition, another reason that contributed to the record-breaking increase in domestic gold bar prices came from the State Bank's unsuccessful gold auctions.

Source: https://congthuong.vn/5-ly-do-nen-dau-tu-khi-vang-van-dat-nhu-tom-tuoi-319358.html