The rapid rise in gold price, with a new record lately, confirms that economic uncertainty is currently moving at very high levels, leading investors to seek safe refuge for their money. In the war in Ukraine and the Middle East, the uncertainty was added by the new Trump government’s policies on duties and international trade, leading to increased demand for precious metal.
Gold is mostly a safe investment refuge as its value is timely tested. The limited ability to increase its supply “guarantees” its value, and for this reason, after all, it has been the main means of payments in earlier times.
The offer of money from the central banks was based on its coverage of the precious metal they owned and until the early 1970s the US had the obligation of a fixed dollar -gold ($ 35 per ounce) equivalence. In 1971, in a high inflation period stabbed by the war in Vietnam, the US abolished this compulsory conversion and together with Breton Woods’ stable exchange rate system.
Despite the abolition of the golden rule, the central banks continued to maintain a significant proportion of their foreign exchange rates and this trend was reinforced in times of economic uncertainty. The glow of gold is more intense when economic uncertainty coexists with a lack of profitable alternative money investments, such as during the 2008-2009 global financial crisis. With the stock markets sinking and interest rates reduced to very low levels, gold was particularly attractive and the high rise in demand resulted in its price exceeding September 2009 $ 1,000 per ounce and overflowing compared to In April 2000, when it was $ 300.
His price gallop continued until August 2011, when he reached $ 1,820. However, as the global economy has gradually returned to growth rates and the stock exchanges were again up, frenzy for gold stopped and its sales tendency prevailed in the following years. Thus, its price fell to $ 1,000 at the end of 2015 to start growing and reaching June 2020 at high levels of 2011.
In 2020, a new upward trend has begun, which has become more intense than April 2023, when its price exceeded $ 2,000 to climb quickly, with multiple records in 2024 and culminate last week close to $ 2,900 .
Although today’s period is not the same as that of the Great Crisis, it has similarities that explain the new ejecting of gold price. Continuing records are due to the overall economic uncertainty combined with the reduction in fixed returns as large central banks began to reduce their interest rates in the second half of 2024. The European Central Bank has reduced deposit rate to 2.75% from 4% In June 2024 and the US Central Bank (Fed) by one percentage point, at 4.25% to 4.5%. However, the waiting attitude of the Fed about the further reduction of its interest rates may, according to analysts, limit a further rise in gold price.
The net demand for gold from central banks (markets minus sales) has been positive over the last 15 years, but has been jumped over the last three years, after Russia’s invasion of Ukraine, and is moving over 1,000 tonnes, with overall demand to approach 5,000 tonnes or at value of 382 billion. dollars.
According to World Gold Council report data, investor demand for precious metal took off in 2024, increasing a 25% increase to 1,180 tonnes. The demand for the purchase of gold and gold coins remained stable compared to 2023, but the large outflows ($ 244 million in $ 2023) stopped by the gold -stocks listed in gold (ETFS).
Demand for bars and coins has increased in China (20%) and India (29%), offsetting large cuts in the US (-33%), Europe (-50%) and Turkey (-25%), But where he moved to high levels compared to the past decade.
The ejector, however, of the price of gold resulted in the jewelry being very expensive and thus reducing their demand by 11% to 1,877 tonnes in 2024.
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