Market of the Month - Gold, an overview
06:00, 30 September 2024
In 2024, gold has been on an upward trajectory, hitting high after high as global markets face ongoing challenges. This precious metal, long seen as a safe haven, has been proving its worth, drawing attention from traders around the world as its bullish surge continues.
In times of economic uncertainty, gold’s role as a stable store of value has historically often become even more pronounced. Whether it’s inflation fears, geopolitical tensions, or fluctuations in major currencies, gold has been seen as a way to provide a buffer against market volatility – although past performance is not a reliable indicator of future results.
Gold’s key drivers this year
But what are the key factors that have been impacting the gold price in 2024?
- Economic uncertainty and recession fears
Persistent concerns about a global economic slowdown, particularly in major economies like the US and China, have helped push investors towards safe-haven assets like gold. The uncertainty surrounding economic growth has heightened demand for gold as a store of value.
- Inflationary pressures
Despite efforts by central banks to curb inflation, rising prices in essential goods and services have continued to erode purchasing power in 2024. As a traditional hedge against inflation, gold has benefited significantly from these inflationary pressures.
- Central bank policies and interest rates
Central banks, particularly the Federal Reserve, took a more dovish stance earlier in 2024, pausing or slowing the pace of interest rate hikes. This has weakened the appeal of interest-bearing assets and strengthened the demand for gold, which often becomes more attractive in a low-interest-rate environment.
Some central banks have reintroduced or maintained quantitative easing measures to support their economies, which has fuelled fears of long-term currency devaluation and increased gold's appeal as a hedge against monetary expansion.
- Geopolitical tensions
Heightened geopolitical tensions, particularly in regions like eastern Europe and the middle east, have driven safe-haven demand for gold. Investors have flocked to gold to protect their portfolios from potential market disruptions caused by these conflicts.
- US dollar fluctuations
The US dollar has experienced periods of weakness in 2024, making gold more affordable for investors holding other currencies. This inverse relationship between the dollar and gold has played a significant role in gold's price increase.
- Central bank gold purchases
Central banks, particularly in emerging markets, have increased their gold reserves in 2024 as part of their strategy to diversify away from the US dollar. This steady demand from central banks has provided additional support for gold prices.
- Market sentiment and speculation
Strong bullish sentiment among investors and speculators has amplified gold's upward momentum in 2024. Expectations of continued economic uncertainty and further monetary easing have driven speculative interest in gold, contributing to its price surge.
- Technological and industrial demand
In 2024, technological advancements, particularly in electronics, have increased industrial demand for gold. This has added another layer of support to gold prices, although it’s a smaller factor compared to the macroeconomic drivers.
Past performance is not a reliable indicator of future results.
Next week, we’ll visualise how and when these factors impacted the gold price over the past year.
Event: European core harmonised index of consumer prices: 1 October, 9:00am UTC
Why it matters for gold: While the impact of European figures may be lower than those of the US, higher-than-expected inflation can potentially drive demand for gold as a hedge, while lower figures might reduce its appeal.
Event: US non-farm payrolls: 4 October, 12:30pm UTC
Why it matters for gold: Strong US job numbers might boost the dollar and weigh on gold, while weak employment figures could have the opposite effect.
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