The price of gold surged to yet another all-time high on Tuesday, August 20, 2024, challenging the conventional belief that the precious metal’s returns peak solely during financial market distress. According to Investopedia, the spot price of gold reached an impressive $2,543.76 per troy ounce in the spot market, marking a 1% increase from Monday. This milestone represents the latest in 2024 where gold has soared by approximately 22%. Meanwhile, according to Reuters, U.S. gold futures settled 0.4% higher at $2,550.6, underscoring the ongoing strength in the market.
Factors Supporting Gold’s Rally
The rally in gold prices is further supported by the U.S. dollar index (DXY), which sank to a seven-month low, making gold more attractive to investors holding other currencies. At the same time, benchmark U.S. 10-year bond yields slipped, adding further momentum to gold’s ascent. According to Aakash Doshi, head of commodities for North America at Citi Research, the primary drivers behind this gold price surge are increased financial investment demand, particularly through ETFs, and improved overall sentiment as expectations grow for the Federal Reserve to begin its easing cycle in September.
Gold’s Role as a Safeguard
Historically, gold has served as a refuge for investors during periods of economic uncertainty, inflation, and turbulence in global financial markets. Interestingly, gold has recently traded more in parallel with stocks than as an alternative to them, highlighting its evolving role in the investment landscape. However, it’s important to note that gold and stocks don’t always move in opposite directions; their relationship is complex and influenced by various factors.
Despite ongoing worries about a possible economic downturn, U.S. economic growth has exceeded expectations this year, supported by controlled inflation. From the job market, with U.S. employers adding 353,000 jobs in January—the highest in a year—to consumer spending, where U.S. retail sales rose 0.6% in December compared to November, surpassing predictions and marking a 5.6% increase over December 2022. Additionally, the nation’s economic output has consistently provided positive surprises in recent GDP reports.
One possible explanation for gold’s sustained demand is the aggressive buying by global central banks. In the first half of the year, central banks purchased a record amount of gold, surpassing the previous record high set during the same period last year by 5%.
Central Banks’ Influence on Gold Demand
This robust demand from central banks is expected to continue well into 2025. According to the World Gold Council, a recent survey conducted between February and April revealed that 29% of central bank reserve managers plan to increase their gold reserves in the next 12 months, the highest level of interest since the survey began six years ago.
Conclusion
Gold’s latest all-time high underscores its enduring appeal as a valuable asset during both prosperous and uncertain times. As central banks continue to accumulate gold and investor sentiment remains positive, the precious metal is likely to maintain its upward trajectory. Whether as a hedge against economic volatility or a strategic investment, gold continues to shine brightly in the global financial markets.
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