The price of gold, a traditional safe haven asset, hits all-time highs. In this Tuesday’s session, the precious metal reached $2,141.6 per ounce in cash, a figure never seen before in the face of growing expectations of a relaxation of rates in the US in the middle of the year and various factors of international tension. The theory suggests that lower rates increase the attractiveness of bullion.
The price remains above $2,100 this Wednesday. Federal Reserve Chairman Jerome Powell’s speech before Congress should give clues today about the central bank’s next steps. An outlook for lower borrowing costs tends to make assets that do not offer fixed returns, such as gold, more attractive.
Regarding the rebound, Carsten Menke, from Julius Baer, ??commented that gold prices have been skyrocketing despite the fact that the usual drivers – the dollar, the US bond and the search for a safe haven – did not move. In his view, the peak of bitcoin, another alternative asset, serves as a boost.
Ned Naylor-Leyland of Jupiter AM believes that two of the main reasons for this rise are “sovereign accumulation of gold (by central banks) and strong physical demand in Asia.” Central banks bought 1,037 tons in 2023, the second highest annual volume on record, according to their data. Still, despite strong demand from Asia, Western investors “remain largely on the sidelines, as evidenced by the decline in gold ETFs.”
The risk of a correction in the US stock market after last week’s weak manufacturing data may have led some investors to abandon stocks and bet on gold, said Ole Hansen, commodities strategist at Saxo Bank. XTB analyst Joaquín Robles adds another cause for the strong rise: the weakness of the dollar, which makes it cheaper to acquire when quoted in this currency.
Nor should we forget the bullion’s role as a safe haven asset, favored by high tensions in the Middle East, disruptions in global shipping, China’s persistent economic problems and the US presidential elections at the end of the year.
