New Record Gold Prices: Will 2024 Be the Best Year in Over a Decade?
In recent months, gold has been gaining value, reaching new record levels. On Friday, the price of gold hit $2,510 per ounce and has mostly remained above $2,500. Since the beginning of the year, the price of this precious metal has risen by over 21%, putting it on track to achieve its best performance since 2020, and possibly even in 14 years, writes eToro analyst for Romania, Bogdan Maioreanu. This increase is driven by a range of macroeconomic and geopolitical factors that favor investments in safe-haven assets.
The most important reason for the rise in gold prices is the anticipated interest rate cut in the U.S. in September, which contributes to a weaker dollar and lower yields on U.S. bonds. At the same time, the U.S. CPI inflation rate has decreased from 3.0% to 2.9%, further strengthening gold’s position as an attractive investment. Additionally, ongoing geopolitical tensions, such as the conflict in the Middle East and the war in Ukraine, are increasing demand for gold.
Political uncertainty related to the upcoming U.S. elections and the Trump-Harris rivalry also contribute to the growing interest in gold. Markets are concerned about potential political and economic turbulence, prompting investors to place their capital in stable assets like gold. The prospect of a Donald Trump victory could further drive up gold prices, although markets are better prepared for this possibility than they were in 2016, which might result in less volatility. Trump’s immigration policies, risky tariff strategies, upcoming trade wars with China, and repeated threats to withdraw from NATO remain significant concerns.
The strong correlation between interest rates and bond yields highlights gold’s importance: falling interest rates or the prospect of rate cuts put pressure on bond yields and increase the attractiveness of gold as a safe haven. Since the end of April, the yield on 10-year U.S. Treasury bonds has fallen from 4.7% to 3.9%. This weakens the dollar, making gold cheaper. The EUR/USD exchange rate has risen by 3.4% since May, surpassing the 1.10 level. Markets expect interest rates to drop by 2 percentage points by mid-2025, which will maintain gold’s attractiveness in the medium term.
This year, Gold has clearly outperformed Wall Street. Since the beginning of the year, gold prices have increased by 21.3%, while the S&P 500 has risen by 18% over the same period. Moreover, technical analysis tools suggest further potential increases in gold prices. If the rally continues until the end of the year, 2024 could be the most successful year for gold in 14 years, provided it surpasses the 2020 performance, when gold prices rose by 24.2%.
It is also worth noting the role of central banks, which have significantly increased their gold reserves in recent years. In 2022 and 2023, central banks, including those in China and Poland, purchased over 1,000 tons of gold annually. Although the pace of these purchases slowed slightly in the second quarter of 2023, central banks remain a significant factor supporting gold prices.
In conclusion, 2024 could turn out to be the best year for this precious metal in over a decade. However, when investing in gold, we should always be aware of the risks and be prepared for a possible trend reversal.
Source: https://universul.net