Gold prices have reached an all-time high due to a decrease in the US dollar, as traders anticipate the possibility of the Federal Reserve cutting interest rates next year.
The safe-haven asset, like gold, went up by 3% to $2,135 per ounce on Monday, making a new record. However, it later went down to $2,066 per ounce, as per information from LSEG. The recent increase in gold prices is attributed to a 3.1% decline in the value of the dollar against other currencies since November. The dollar is currently near its lowest point in almost four months. This drop, coupled with lower US Treasury yields since mid-October, is happening because investors believe the Federal Reserve will decrease borrowing costs next year. The upward trend in gold prices started last November, driven by significant central bank purchases and investor concerns about conflicts in Ukraine, Israel, and Gaza. Despite rising interest rates over the past year, which typically reduces interest in non-yielding gold, the demand for the precious metal has remained strong.
Ross Norman, CEO of Metals Daily, suggests that the recent surge in gold prices may be due to speculative trading by some traders in a less active market. He explains that these traders are taking advantage of factors like a declining dollar, a favorable time for buying, and ongoing global tensions. The recent decrease in bond yields, indicating expectations of lower interest rates, has further contributed to gold’s 12% rise in the last part of the year. Federal Reserve Chair Jay Powell mentioned on Friday that they might increase interest rates more, but he also noted that policies were already somewhat restrictive. Some analysts caution that sustaining high gold values may be challenging unless a more widespread buying trend emerges across various market participants.
Market Response:
The value of gold went up and set a new record at $2,148, attracting buyers once it passed $2,100. Currently, as of now, the gold price (XAU/USD) is approximately $2,135, marking a 2.90% increase for the day.
Why Gold is rising
The price of gold reached $2,111.39 in overseas trading on Monday and then slightly dropped to $2,071. This represents a 14% increase for the year, while the S&P 500, another financial measure, has gone up by 21% in the same period.
The reason for the rising gold prices is that people are buying more of it as a way to protect themselves when prices for things go up (inflation) and during times of trouble in the world (political instability). Current events, like the conflict in Ukraine and the issues between Israel and Hamas, are making people worried. People from countries such as China, India, Indonesia, and Saudi Arabia are also buying more physical gold as part of their financial strategy, according to Louis Gave from Gavekal research.
Will Gold Price keep rising
Experts are suggesting that the price of gold could increase further, mainly because they believe the Federal Reserve (Fed) will start lowering interest rates next year. If the Fed reduces rates by 1 percentage point in the second half of 2024, analysts from JPMorgan predict that gold prices could reach a new high of $2,300 per ounce in 2025.
Even popular retailer Costco has entered the gold market by selling gold bars to its members, and these are quickly selling out. However, selling gold at today’s high prices can be a bit complicated. There are online buyers like The Alloy Market and Express Gold Cash that offer close-to-market prices for gold and provide insurance to protect your investment.
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