Gold is gaining weight in investors' portfolios - Eurasia Business News

By Swann Collins, Investor, Writer and International Business Consultant – Eurasia Business News. July 29, 2024. Article #1124

Political turmoil in the United States in July following the attempted assassination of candidate Donald Trump and Joe Biden's decision to drop out of the race due to health reasons contributed to the rise in gold prices.

Gold prices hit new records in 2024. On July 16, gold prices jumped to a new record. Prices for the yellow metal are holding close to $2,400 per troy ounce, having added 15% since the beginning of the year. Ruble prices for the precious metal have moved away from a local maximum against the backdrop of the strengthening of the Russian currency. However, against the backdrop of restrictions on trading in "toxic" currencies and a new wave of ruble depreciation in the second half of the year, investor interest in this asset may increase.

In mid-summer 2024, the price of gold on the world market updated the all-time high set two months earlier. On July 17, the price of the precious metal on the spot market reached $2,483.47 per troy ounce, according to Investing.com data. Even taking into account the subsequent correction to $2,380 per ounce, the price remains 2.4% higher than the value at the end of June. Since the beginning of the year, the precious metal has increased in price by 15%.

Geopolitical risks remain the main factor driving high gold prices.

In addition to the conflicts in Ukraine and the Middle East, the deterioration of US-China relations was also compounded by the risk of the US presidential election in November. In July, two election-related events occurred simultaneously: the assassination attempt on US presidential candidate Donald Trump and Joe Biden's withdrawal from the race.

These incidents have increased political instability in the country and raised concerns among investors.

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Bet on the rescue

Geopolitical risks have returned to being key risks with unpredictable consequences for the global economy. According to a Bank of America survey of portfolio managers in June, 26% of respondents said they were key to the global economy over the next 12 months. The previously dominant risks of high inflation, at 22%, have moved into second place.

Growing geopolitical uncertainty is pushing central banks to diversify their gold and foreign exchange reserves and abandon investments in government bonds of developed countries (United States, Europe).

According to the World Gold Council, in 2023 central banks added 1,037 tons of gold, the second highest annual purchase in history, after the record of 1,082 tons in 2022.

In the first quarter of 2024, global financial regulators purchased nearly 290 tonnes of the precious metal, which is 3.5 tonnes more than in the same period in 2023.

Expectations of a Fed rate cut are having a favorable effect on gold prices. Analysts at Goldman Sachs and Moody's believe that the U.S. regulator may cut the federal funds rate at a meeting on July 31. Previously, such a move was not expected in the market before the September meeting.

This could impact the strength of the dollar and the attractiveness of investing in U.S. government bonds, leading to an increase in the popularity of gold as a traditional hedge.

Read also : Gold: Build Your Wealth and Freedom

Analysts do not rule out further price increases in global and local gold markets. The main factor in the rise in dollar prices will remain high geopolitical risk, as well as a possible deterioration of the economic situation in the world.

The likely return of Donald Trump to power in the United States next November should further worsen relations between the United States and China and lead to increased geopolitical risks and demand for the precious metal. According to Paul Jouvenet, essayist and consultant on international affairs, the difficult situation of the global economy against the backdrop of continued inflationary pressure will support gold prices in the range of $2,400 to $2,700 per troy ounce.

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Italian: – Eurasia Business News. Article No. 1120.