What factors have caused world gold prices to continuously reach new peaks in recent days?

Huge purchasing power from a market of billions of people

The world gold market witnessed a fever during the week from March 3 to March 8 with prices continuously setting new records. According to Bloomberg, demand from China and expectations of the Fed easing monetary policy were the two main factors driving this increase. In particular, China's demand for gold increased dramatically.

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Demand from China and expectations of the Fed easing monetary policy are two main factors driving the gold price increase this time - Photo: GETTYIMAGES

After months of turmoil, the world gold market suddenly became active again on March 8. Previously, on March 5, the gold price broke the record set in December 2023 and continuously increased to new highs in the following days.

Bloomberg said the foundation of this record recovery is coming from China. According to data from the US Commodity Futures Trading Commission, Chinese money managers increased their gold purchases in the week ending March 5, contributing to the increase in gold prices.

Fed monetary easing expectations

In addition to demand from China, expectations of the Fed easing monetary policy are also an important factor driving gold prices.

Gold prices surged on March 1 after the latest economic data showed weaker-than-expected U.S. manufacturing activity and depressed consumer sentiment, leading to speculation that the Fed would cut interest rates sooner rather than later, spurring investors to pile into gold.

Next, on March 6 and 7, at a hearing before the US Congress, Fed Chairman Jerome Powell once again affirmed the possibility of the Fed cutting interest rates this year, creating more momentum for the gold price increase.

Despite its recent surge, gold still has room to grow, according to Bloomberg, which said the global gold price still has a long way to go before reaching its inflation-adjusted peak set more than a decade ago.

Since the early 2000s, the price of gold has increased by a total of more than 600%. However, based on inflation, the price of gold is still lower than the $850/ounce reached in January 1980, equivalent to more than $3,000/ounce today.

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