The more uncertain the times, the higher the price of gold. It is therefore no wonder that the price of the crisis currency has already risen by a fifth against the euro this year. There is currently no end in sight to the gold rally; According to analysts, the $3,000 per ounce barrier could be broken in the medium term.
Recently, tensions in the Middle East and the Iranian attack on Israel have caused the gold price to reach new highs. The expected interest rate cuts by the US Federal Reserve and the European Central Bank also make gold look more attractive. Falling interest rates make gold increasingly attractive compared to fixed-income investments such as bonds.
Not only gold is on the rise
But not only the gold price has risen, but also the prices of oil and copper, and the stock markets have also risen, says gold expert Ronald Stöferle, known for his analyzes of precious metals and raw materials. Currently there is a flight to material possessions. “Due to persistently high inflation, a lot of capital is flowing out of by far the largest and most important asset class, namely the bond market.”
“Silver has also done reasonably well thanks to the tailwind from gold, but we are still well below the all-time highs, anyway adjusted for inflation,” Stöferle sees as a good entry opportunity for investors. “Mining stocks have also slowly started to rise again.”
Central banks support the gold price
The gold price is also supported by high demand from central banks. “They have reached a small trough below the gold price and are obviously not incredibly price sensitive.” In 2022, central bank demand for gold reached a record high, and in 2023 it was only slightly lower. “In 2024 it looks like they will purchase more than 1,000 tons again. These are mainly central banks from emerging markets, and especially of course China.”
The crumbling real estate market there also means that investors are looking for alternatives. “The Chinese stock market has not really done well, interest rates on savings accounts have fallen – the gold market is clearly visible. The purchases have reached incredible proportions and fortunately this can continue, because Chinese savings volumes are extremely high.”
India has also been less price sensitive so far – although elections are now being held there and historically gold demand has always declined during whales lasting several weeks. “China and India are responsible for more than half of the physical demand, the emerging markets generally for more than 75 percent,” Stöferle explains. “The price of gold is certainly no longer determined in the Western world, but it is in emerging countries.”
The gold price could get a further boost if Western financial investors also jump on the bandwagon, says Stöferle. “Investor demand, as evidenced by ETFs (exchange traded funds, note), is still relatively low.”
Smaller downward corrections are possible
Smaller downward corrections may occur in the short term. “Overall, I can definitely imagine there will be a lull in the coming weeks. It should not be forgotten that the gold price has risen extremely sharply since the beginning of the year. On a euro basis there was an increase of 20 percent, on a dollar basis 15 percent, for the Japanese yen 26 percent and for the de facto hard currency Swiss franc 25 percent.”
In principle, the bull market is intact, says Stöferle, whose investment and asset management company Incrementum AG, based in Liechtenstein, will publish its next “In Gold We Trust” report on May 17.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
