Gold is gaining value. Too much. Fast. And powerfully. The charts for the price of the precious metal, one of the largest safe-haven values, show a clear upward trend, reaching unprecedented figures for days. For example, the Gold Price or Bullion Vault charts show its value today reaching around $2,170 per ounce; This is well above what it was just a short year ago and is a far cry from the amounts discussed in 2018 or 2019. It is necessary to understand gold’s role as a reliable asset, as well as what is happening on the international stage, from the US to China, passing through a tense Middle East.

These are keys.

Gold with historical values. This is the basic idea, the one that is most relevant and explains why gold prices have been the subject of media chronicles over the last few days. GuardianCNN or Finance Times. Yesterday, $2,164 per ounce was reached, the fifth maximum in three days, and the Gold Price charts show it is still in the highest region of its historical chart, between 2,160 and 2,170. For reference, on Tuesday the metal touched 2,142 and a day later the price surpassed that value twice.

look back. The values ​​we see these days have surpassed the previous record, when the troy ounce reached $2,135 in December. If we broaden the focus and go back to the history of the Gold Price starting in the 70s, it can be seen that the rise becomes evident. Although this is not the first time a sharp peak has been seen on the price chart, these peaks have never been this high.

Finance Times He confirms, albeit with a footnote, that this is a nominal historical maximum: if we look at inflation-adjusted values, the ounce will still be far from the peak it marked in 1980. So there were two keys to understanding the data and an upward trend that lasted for years: tensions in the Middle East and inflation caused by oil.

Alright what now? There are a number of factors, although analysts who explain the rise in gold prices in general tend to emphasize one factor in particular: the expectation of a “possible interest rate cut by the US Federal Reserve,” said IG analyst Sergio Ávila.

A number of indicators, such as a decline in construction spending and consumer confidence, have led to the theory that the Federal Reserve will soon cut interest rates in the summer.

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US economy. The possibility that the US Federal Reserve would cut interest rates in June had already triggered an increase a few days ago. Another interesting effect showed itself in the yield of government bonds: Two-year Treasury bonds fell by 0.23 points in a few days, falling to 4.56% at the beginning of this week.

Finance and geopolitics. There are more factors at play, as ActivTrades analyst Ricardo Evangelista explained to Swiss Info: “Concerns about the global economic outlook, geopolitical tensions and changing expectations regarding expected interest rate cuts have led to increased demand for the precious metal.” The result of this, he concludes, has been “an upward trend in prices” in recent days.

Other voices question whether speculation about a Federal Reserve rate cut has such a significant impact on the price of gold. HSBC analyst James Steel points to this, opening the door to other factors: “There are new participants in the market who are driven by uncertainty and are looking for gold as a safe haven. There is a smaller group of assets that are in fashion and gold is one of them.”

Let’s also look at the Middle East… Shooting could be a little more focused. There are analysts who remember that the historic rise in gold prices coincided with a period of tension in the Middle East, and investors often turned to the precious metal as a reliable deposit in times of both financial and political uncertainty. Guardian He notes that an ounce has risen by more than $300 since the beginning of the war between Israel and Hamas.

A similar thought is shared by Charles Stanley’s Patrick Farrell; He believes that it will not take long for the gold price to reach its maximum level. “It’s been a gloomy year for many commodities. The combination of weakening economic growth, especially in China, and corrections following some post-pandemic euphoria has caused energy, industrial metals and raw material prices to fall in the ‘energy transition’. Farel said, “copper and nickel “On the other hand, as geopolitical tensions increased, gold reached new peaks. “The situation may be about to turn.”

…and we look at banks and China. Another important development will be the purchases that Chinese central banks and investors have been making for months. First of all, to understand the recovery that gold prices have experienced in recent months, the same has been seen on Gold Price charts for a long time.

The first is explained by the decision of emerging market central banks to make large purchases. The second, regarding Chinese buyers, is linked to another well-known phenomenon: the decline in real estate and stock markets. In this context, there are those who have started to make important acquisitions in China. “This is a secret rally,” he tells the newspaper. Finance Times Ross Norman, director Metals Daily: “There are no Western investors behind this. Gold continues to flow eastward.”

The mark left by Switzerland. Another clue comes from Swiss exports to China; As Bloomberg reminds us, this is generally a good indicator of gold demand in the Asian giant. Its streams nearly tripled in January. The key can again be found in consumers’ efforts to protect themselves against fluctuations in the stock market and the real estate crisis that plagues the country.

The institution also states that China will be one of the most important accumulation points of the metal in 2023 and is among the central banks that have chosen this path in search of less dependence on the dollar.

Image | Jingming Pan (Unsplash)

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