Gold is enjoying a resurgence, with its price surging by around 10% in the past month, surpassing $2,000 for the first time in over a year. And according to experts, the precious metal could continue to rise, with some predicting it could reach as high as $2,600 per ounce. The U.S. Federal Reserve’s interest rate decision and struggling global banks are contributing to this upward trend. Tina Teng from financial services company CMC Markets expects gold to trade between $2,500 to $2,600 an ounce.
This increase is unusual as there’s usually an inverse relationship between gold prices and the U.S. dollar. However, investors tend to like the perceived safety of U.S. Treasurys and gold simultaneously during periods of financial stress. This is good news for gold investors but a warning for everyone else, as the price typically rises in times of trouble.
Gold demand is influenced by three main factors: the US dollar, bond yields, and political and economic risk. The stronger the dollar, the more expensive gold becomes to buyers in other currencies, reducing demand. Gold demand also decreases when interest rates are rising and lower-risk asset classes such as bonds and cash pay more income. However, when investors are nervous, they typically seek safety in gold, the world’s oldest safe haven and store of value.
Last year, gold hit an all-time dollar high of $2,067.15 amid initial Covid uncertainty and again after Russia invaded Ukraine. But it collapsed as the early panic eased. Sticky inflation, rising interest rates, monetary tightening and risky credit are creating ripe conditions for a worldwide recession and gold resurgence. Falling bond yields and fresh Chinese buying as its economy reopens are also boosting demand.
Gold rebounded in 2019 and reached its peak of almost $2,073 per ounce in August 2020. The COVID-19 pandemic increased the popularity of gold as a hedge against volatility in equity markets and negative interest rates. However, demand from gold-consuming countries like India and China decreased due to economic turmoil caused by the pandemic. Investors have filled the gap in demand, and exchange-traded funds have accumulated 1,205 tons of gold in their reserves. Central banks have also been buying gold, but they became net sellers in the third quarter of 2020, reducing reserves by 12.1 tons. The economic recovery from the pandemic continued, leading to a decline in gold prices in January-March 2021. However, gold prices began to rise again in July due to a sharp decline in US yields. The article covers historical data, expert predictions, technical analysis, and gold price forecasts for 2022 and beyond. It also examines factors that may affect the price of gold and whether gold is a good investment.
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