The current geopolitical tensions in the Middle East, combined with sustained buying by central banks and a weakening dollar, are expected to drive up the demand for gold as a safe haven and a hedge against economic and political instability. This has led to a 12% increase in the price of gold this year, highlighting its enduring appeal as a hedge against economic uncertainty. Alex Ebkarian, COO and co-founder of Allegiance Gold, attributes this surge in gold prices to a combination of factors such as rising inflation, a weakening dollar, and ongoing geopolitical tensions.
Central banks, especially those led by BRICS Plus nations, are increasingly investing in gold, shifting away from US treasuries. This trend is expected to continue as central banks view gold as a more secure investment option in times of economic uncertainty. Precious metals analysts suggest that the gold market remains vulnerable to fluctuating US economic indicators, Federal Reserve policies, and global geopolitical events, all of which can significantly impact the price of gold in the short to medium term.
According to Mohamed Hashad, chief market strategist at Noor Capital, the recent surge in gold prices can be attributed to factors such as its status as a trusted safe haven asset and the influence of Federal Reserve policies. The decisions made by the Federal Reserve, including interest rate adjustments and asset repurchasing policies, play a crucial role in determining the direction of the gold market. Recent statements by Fed Chair Jerome Powell have further fueled the upward trend in gold prices, highlighting the interplay between monetary policy and gold.
Michael Ashley Schulman, partner at Running Point Capital Advisors, predicts that if the Federal Reserve decides to lower interest rates, the dollar may weaken, leading to an increase in the relative value of gold. Lower interest rates also make non-interest-bearing assets like gold more attractive to investors. Schulman suggests that the current uptrend in gold prices is partly based on speculation that the Fed will lower interest rates, further supporting the demand for gold as a safe haven asset.
Hashad emphasizes the significant increase in central banks’ purchases of gold as they seek a safe haven and hedge against market fluctuations amid escalating tensions in the Middle East. China, for instance, has been consistently increasing its gold reserves over the past year, highlighting the global trend of central banks diversifying their foreign exchange reserves with gold investments. Analysts predict a further rise in gold prices due to these factors, potentially reaching unprecedented levels in the near future.
In conclusion, the price of gold has surged to new heights in 2024, with gold futures increasing by over 14% since the beginning of the year. Gold’s price per ounce reached a record high in early March, surpassing $2,160 per ounce. The price has continued to climb and currently stands at $2,346.33 per ounce as of April 15. The combination of geopolitical tensions, central bank investments, and Federal Reserve policies are expected to sustain the upward trend in gold prices, positioning gold as a valuable asset in times of economic uncertainty.
