![]() ![]() Plus, the weakening of the US dollar and the perceived slowing of the Fed’s rate hikes is supporting the USD-denominated gold. Central banks’ demand for the precious metal remained unquenched, contributing an impressive 228 tonnes to global reserves in the first quarter of 2023, according to the World Gold Council, with Singapore, mainland China and Turkey among the biggest buyers. Yet investors aren't the only ones who see gold as a hedge against economic downturn. Further destabilisation came when Credit Suisse admitted substantial weaknesses in its bookkeeping, leading to a $17 billion loss in bonds and a rescue takeover by rival UBS, leading investors to seek refuge in gold. “Gold bugs will be on the look-out for any signs of higher spending and higher deficits as justification for their faith in the precious metal as a store of value at a time of fiscal incontinence and after an extended period of money printing.”Īnother key driver of safe-haven demand was the banking turmoil triggered by the collapse of Silicon Valley Bank in March 2023, the largest banking failure since the 2008 financial crisis. Michael Pearce, Oxford Economics' Lead US Economist, stressed that this deadlock increases the risk of a damaging default and, even if avoided, likely leads to federal spending cuts that could hurt the economy: May 2023 saw a standstill between Democrats and Republicans over the US debt ceiling, with the Treasury Secretary Janet Yellen warning that this impasse could lead to a cash deficit by June. Investors tend to hoard during times of uncertainty hoping that the metal will preserve its value.Ĭurrently, the US debt ceiling negotiations and the possibility of a US debt default are the key drivers of anxiety for investors. In 2023, the received support from the wider the wider economic pessimism and fears of the upcoming recession. This was driven by the confluence of US debt ceiling concerns and the Fed’s indications of a halt in the tightening cycle, both of which sparked an upsurge in gold demand. The precious metal continued its bullish stride, peaking at an intraday high of $2,067 on 4 May. Additionally, the rejuvenation of China's economy, leading to a surge in jewellery demand, lent further support to gold's price at the start of 2023.Īmid the banking sector's disarray following Silicon Valley Bank's downfall in March, gold vaulted over the $2,000 milestone as investors sought refuge in safe-haven assets. ![]() The price rise was underpinned by the less hawkish tone conveyed by Jerome Powell of the US Federal Reserve ( Fed). The precious metal’s price experienced a 14% ascent from November 2022 to the early part of February 2023. ![]() Some investors choose exposure to gold-mining stocks, or gold-linked exchange-traded funds ( ETFs).Ī shift towards bullish momentum was observed in the gold market towards the end of 2022 and into 2023. Gold can be bought as a bullion in its physical form, or traded through financial derivatives. Conversely, when the USD is falling in value, it fuels gold demand. The USD strength against other currencies hurts the price of gold as it becomes more expensive and hence less attractive for overseas buyers. Gold is denominated in US dollars, which means the precious metal has an inverse relationship with the greenback. Some investors believe in its safe-haven quality and use gold to hedge against inflation and economic uncertainty. Yet the yellow metal is also seen as an investment asset, preserving value throughout centuries. In the modern day and age, gold’s demand has expanded to industrial use, most notably in production of electronics.Īs with many commodities, gold’s price is highly influenced by the forces of supply and demand. Throughout centuries the precious metal was used as a store of value and showcase of wealth. Gold was first discovered by Ancient Egyptians over 4,000 years ago. Will the bullish momentum for the yellow metal continue and what’s the long-term outlook? Here we take a look at the gold price predictions for the next 5 years. ![]()
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