Uncertainty makes gold soar. New record for the price of the precious metal, which has exceeded 2570 dollars per ounce. This means +22% since the beginning of the year and +32% compared to twelve months ago. Analysts’ forecasts speak of the milestone of 3 thousand dollars within the year. But an appreciation at these levels, a rally much higher than that of the shareholder base (22% against 16% of S&P 500 for example) cannot be explained only by the search for safe haven assets dictated by the historical period.
Surely one of the pushes comes from geopolitical tensions: the war between Russia and Ukraine, the one in the Middle East that risks widening. And then there are the economic and political tensions between the United States and China and the uncertainty typical of the American electoral period, with elections in November. All this leads the market to believe and support safe haven assets (including silver and platinum) and so the price soars and a constant and continuous growth is estimated at least until the end of the year.
The unknown “rates” weighs heavily. Uncertainty reigns supreme here too and therefore the price of gold rises. The increased probability of a rate cut by the Fed in Septemberpushes the price of the precious metal. This is also why there is great anticipation for the speech by Jerome Powell, president of the American Central Bank, next Friday at the Jackson Hole symposium that officially opens tomorrow. The July meeting of the Fed has given a glimpse of the end of the monetary policy of these years, but certainty will only be had next month (September 18).
All this is not enough to explain the record of gold and the forecast of a continuous run. Another reason is the strong purchases of the Central Banks. They bought over a thousand tons of gold last year, decreasing the foreign exchange reserves in favor of the precious metal. In the second quarter of 2024 there was a 6% increase on an annual basis. And in addition to buying more gold than they sell, many are bringing “home” the gold reserves kept abroad. The increase in demand has corresponded to an increase in supply. Obviously the effect is the rise in the price. Away from the US dollar and room for gold. According to the World Gold Council, the share of the dollar in world reserves in March 2024 was 58.9%, against 70% in the early 2000s. Economic reasons certainly (protecting themselves from market volatility), but also political ones. De-dollarization is the flag of China and the BRICS bloc. That’s why $3,000 an ounce for gold by the end of the year is a far from remote goal.
