Gold prices are soaring to record highs in 2024, recently surpassing the $2700 per ounce mark. Let’s delve into the reasons behind this surge and what savers and investors should consider.
Gold bars are highly sought after by investors.
The price of gold is breaking records one after another. At the end of last week, the precious metal cost more than $2700 per ounce for the first time. On Monday, the price rose in trading to the $2740 mark.
This represents a 32% increase since the beginning of the year. The long-term trend is even more impressive. A decade ago, an ounce of gold was priced at $1248, and twenty years ago, it was just $424.
Strong Demand for Gold
Gold is in high demand from central banks, private investors, and the jewelry industry. Several factors contribute to the recent price surge:
- US Presidential Elections on the Horizon: The upcoming US presidential elections are considered one of the main reasons for the recent rally in gold prices. According to Alim Remtulla, Chief FX Strategist at EFG Bank, the recent increase is partly attributed to the growing chances of Donald Trump winning the elections.
- Lower Interest Rates: Recent central bank interest rate cuts are also likely a factor in the rising gold prices.
- Geopolitical Tensions: Conflicts in the Middle East and Ukraine play a role in driving up gold prices as it is seen as a safe haven asset in times of uncertainty.
- Continued Gold Purchases by Central Banks: Central bank purchases continue to significantly influence gold prices.
An Insurance for Crises
Gold investments have yielded high returns in recent months, serving as a traditional insurance asset in investment portfolios during times of crisis.
Gold tends to perform well in periods of market volatility or recessions, making it attractive given current global risks.
Pros and Cons of Gold
To generate returns from gold investments, investors must rely on price appreciation. While the current environment is favorable for gold, there is also increased potential for disappointment due to rapid gains.
Robert Leitner, Head of Research Asset Management at VZ Depotbank, considers the long-term return and risk characteristics of gold to be “not very attractive.” Gold has historically underperformed compared to stocks and bonds in certain periods.
The geographical shift in gold demand, with a growing percentage from Asia, highlights the need for increased investments from the West to sustain price trends.