The price rose above US$2,700 an ounce of goldrising 0.60% in 24 hours, as uncertainty over the outcome of the US elections and the easing of monetary policy by the Fed and ECB increasingly turns the safe haven yellow.
During the week, gold also rose almost 1%.
“It’s only a matter of time before gold breaks the ‘chains’ and heads toward $3,000 an ounce,” says analyst Ronnie Wagner, adding: “Gold is on the offensive again and heading for new records.”
12 months ago, the price of gold fluctuated in a narrow price range between $1,900 and $1,950 per ounce, with the most optimistic scenarios setting a high target of $2,000. But having since recorded an increase of around 30%, gold is one of the asset classes showing the strongest growth – well ahead of technology stocks included in the Nasdaq (+19.8%), for example.
A Trump presidency
Uncertainty over the results of the US elections and possible changes in economic policy by the next administration are driving many investors to safe havens like gold. “A new presidency Trump– explains Wagner – could further support gold prices, as the Republican candidate’s protectionist trade policies could fuel inflation expectations.
High inflation combined with low interest rates is traditionally seen as a positive for the price of gold.”
“Uncertainty is poison”
Uncertainty is poison for financial markets, says an old saying that is more relevant than ever, emphasize market players in London at Naftemporiki. “Donald Trump’s race with Kamala Harris is close and the outcome has rarely been more difficult to predict. This uncertainty over the outcome of the elections, combined with global geopolitical tensions, is increasingly directing investor attention towards one commodity: gold. A commodity, independent of governments, central banks and currencies”
With an increase of around 30% since January, gold is one of the asset classes that has shown the strongest growth since the beginning of this year, well ahead of technology stocks included in the Nasdaq 100 (+19.8%), for example.
China’s role
Ned Naylor-Leyland, gold expert at Jupiter Asset Management, doesn’t even think about the beginning of the monetary easing cycle that began the Fed in mid-September, is the most decisive factor in the increase in the price of gold in recent weeks. “The demand for gold has increased as many emerging countries tend to move away from the dollar as a reserve currency”, observes the American expert.
Gold is purchased as a reserve with the aim of diversifying investments or because some investors are convinced that its price will increase further. 95% of gold purchases do not correspond to any real transaction. The only exceptions may be physical purchases by certain central banks or demand from retail customers in countries such as India or China.
Ned Naylor-Leyland adds: “This trend has been further reinforced by the fact that some central banks have in recent years reduced their purchases of US Treasuries and have instead begun purchasing gold steadily over the past five years. years. As such, this is not an entirely new phenomenon, but it has only reinforced gold’s position as a risk-free asset in financial markets.”
“Deep-rooted disbelief”
Many investors’ assessments of gold’s trajectory are also supported by subdued expectations for the global economic future. German economist Roland Baander, author of the book “Geld, Gold und Gottspieler” (Money, Gold and God’s Gamblers), aptly described gold as a “deep-seated distrust” regarding the state of national economies.
In the United States, for example, it is mainly the explosion of national debt that exceeds 35 billion dollars and increases the risk of financial collapse. Interest costs alone cost the US budget a trillion dollars annually. In fact, there is no solution to this problem, regardless of the election result.
Under the leadership of both Democrats and Republicans in the White House, the debt ceiling has, after all, been suspended and raised dozens of times in the past. Political opportunism and fears of an imminent “government shutdown” have so far pushed fiscal reforms to the back burner. As Naylor-Leyland says, “the $3,000 per ounce barrier will be broken at some point, as government spending and public deficits in the US are only rising.”