Gold price approaches $2,500/ounce mark
Spot gold was at $2,355 an ounce on April 9, after hitting a record high of $2,353.81. Gold futures rose 0.5% to $2,362.60.
Gold prices are at an all-time high, experts say, as investors anxiously await the US's moves and the minutes of the Federal Reserve's recent meeting on interest rate cuts.
According to Reuters, gold prices have been rising every day, almost reaching a record high compared to the previous session. This increase is supported by strong buying power from central banks.
"Gold has been a safe haven in financial markets, with central bank covert buying and speculative flows regularly pushing prices higher," Tim Waterer, chief market analyst at KCM Trade, told Reuters .
World gold prices increased sharply, quickly reaching the mark of 2,500 USD/ounce.
Historically, gold prices tend to be inversely correlated with interest rates. Lower interest rates make interest-bearing assets like bonds a more attractive investment.
Experts from UBS Global Wealth Management predict that gold exchange-traded funds will increase their holdings as the US Federal Reserve (Fed) begins to lower interest rates. UBS GWM forecasts gold prices will rise to $2,500 an ounce by the end of 2024, a big difference from the forecast of $2,225 an ounce.
“Gold could still see some downside if there is any movement on the Fed rate cut, but so far, gold has only seen a trickle-down compared to what we expected,” UBS GWM said.
Gold prices have recently surged amid growing concerns about the potential impact of the Fed's rate cut on cryptocurrencies and precious metals, according to Mike Novogratz, CEO of Galaxy Investment Partners.
Additionally, the gold market has seen significant mergers, such as the $1.45 billion merger between Karora Resources and Westgold Resources. These factors, combined with economist Peter Schiff’s advice that “bitcoin holders should switch to gold,” have contributed to the gold price surge.
Countries rush to stockpile gold
Annual gold demand, including over-the-counter orders, is expected to rise 3% to a record 4,899 tonnes in 2023, continuing to rise in 2024, according to the World Gold Council.
Much of this growth has been driven by households and investors in China, which has been buying more bullion due to severe pressure from its stock market and real estate sector.
China has been adding gold to its reserves for the 17th consecutive month, said Krishan Gopaul, senior analyst at the World Gold Council.
"It is clear that central banks still believe in gold and see its superior value," Krishan Gopaul told Reuters.
Currently, the amount of gold held by the Central Bank of China is up to 72.74 million ounces (about 2,263 tons), an increase of 5 tons compared to the figure of 2,257 tons in February. The value of gold reserves increased from 48.64 billion USD to 61.07 billion USD.
The People's Bank of China has been the largest buyer in Asia, with net purchases of 7.23 million ounces (nearly 225 tonnes) in 2023, the biggest year for the People's Bank of China since 1977.
The massive accumulation of gold is part of the financial strategy of central banks around the world.
Currently, countries are massively hoarding gold, with a total purchase of 1,037.4 tons of gold in 2023. In addition to China, the countries that "emerged" in actively buying gold are the central banks of India, Turkey, Kazakhstan... according to Reuters. Previously, data from the Bank of America showed that China, Poland and Singapore led the central bank's gold purchases in 2023.
China’s purchasing strategy fits with its goal of diversifying its assets with the BRICS nations (Brazil, Russia, India and South Africa), a group of countries aiming to become global economic powerhouses by 2050.
As part of the strategy, economies are looking to reduce their dependence on the US dollar. The value of the US dollar is inversely related to gold, as well as recent signs that markets are reducing bets on the Fed cutting interest rates.
According to experts, China's gold rush is not only a financial strategy but also a response to world fluctuations, especially conflicts in Ukraine and the Middle East.
Gold is often seen as a “safe haven” during times of crisis, especially economic downturns. The yellow metal acts as a hedge against inflation and provides diversification for investors.
Source
Comment (0)