Prices exceeding even conservative predictions.
The price of gold has increased dramatically on the commodities marketplace of late, hitting a new peak of $2,135 an ounce on December 4. What could account for the sudden spike that day to the aforementioned price before dropping back down to $2,070 an ounce? It likely had to do with market analysts and even algorithms hitting ‘buy’ upon the market value exceeding the latter price but nobody is really certain.
Why are gold prices on the rise?
And just like uncertainty over the sudden spike in price, there is equal uncertainty in market analytics about just why the base metal is reaching new highs in the marketplace. The most obvious reason cited by some market watchers is the U.S. Federal Reserve chair Jerome Powell intimating further tightening of financial policy in order to reduce inflation to 2% (and especially now that Uncle Sam is entering another election year in 2024).
The potential of falling interest rates is always helpful for the commodities market, inversely rising interest rates should have been a mitigating factor for said marketplace price rises but that simply hasn’t happened as yet.
Political turmoil as an investment opportunity?
What about the current geopolitical situation, with war in both Eastern Europe and the Middle East? In such crisis scenarios, gold does invariably go up but almost always drops again soon after as the market resets and accommodates the ‘new normal’. Israel’s war against the genocidal Hamas hasn’t yet spread to the wider Middle East (as some predicted it would), meanwhile the valiant, ongoing Ukrainian fightback against the Russian invasion of their nation has (temporarily?) faded from the front pages and news headlines, and although a new Cold War with China is bubbling under the surface (as correctly predicted by the recently-departed Henry Kissinger some years ago) plus the Communist state hasn’t yet given any signs of an imminent conquest of Taiwan, so markets have no reason to be overly skittish right now and thus does not explain the rise in gold prices.
The ‘emerging’ gold market
Could it be so-called ‘emerging’ economies like India, China, and Russia that’s driving the new ‘gold rush’ lately? All three have been buying gold in heroic quantities, primarily as a diversification away from the U.S. dollar, in addition to many citizens of those countries increasingly sinking their savings into gold as a way to protect those earnings from volatile markets they don’t entirely trust.
Also, Saudi Arabia recently signed a ‘swap line’ deal (meaning they promise to freely exchange each other’s currencies at the current exchange rate) with China, and where the House of Saud goes, many in the Islamic Middle East follow, indicating a desire to move away from the U.S. dollar, making the stability of hard currency itself look less than stable, which in turn, drives up commodity prices on the marketplace, gold included.
Analysts and market watchers are continuing to keep a keen eye on any new market fluctuations as we speak.
