Gold: The Precious Metal Benefits from Global Crises

Last Updated: 1. Dezember 2023By

The rally in precious metals has picked up speed again. The gold price is on the rise. With the current price increase, the quotation is heading towards a record high. This raises the question, are there also factors that could keep this upward movement going for some time?

Gold price at highest level in half a year The gold price has risen again above the psychologically important mark of 2,000 US dollars and has reached its highest level in half a year. The precious metal has not been so expensive since May. On the market, the recent rise in the gold price is explained by economic concerns. In the eurozone, the worries of many investors are mainly focused on the German economy, which cannot get out of its slump. Fire was added to the oil with the ruling of the German Federal Constitutional Court on the budget.

High government debt could lead to a change in monetary policy Market observers see the rampant debt as the main reason why a change in monetary policy is expected on both sides of the Atlantic. The high and constantly increasing debt can only be carried with long-term lower interest rates. All this speaks for more gold in the portfolio. For anyone who holds cash, an upcoming change in central bank policy means a lower but persistent and long-term inflation compared to 2022. Those who do not want to see their wealth melt away are looking for alternatives, such as the yellow precious metal.

Central banks buy gold The most important factor influencing the gold price is the demand for the precious metal. This is currently being driven by central banks. However, in times of economic uncertainty, other investor groups are also looking for safe havens to preserve their wealth and, if possible, increase it. Even if inflation rises or remains at a high level, the gold price can increase. Investors use gold in such phases as a hedge against a possible devaluation of paper currencies.

Weakening of the US dollar A significant reason for the recent resurgence of interest in the yellow precious metal is also a weakening of the US dollar. This suffers from the assumption that the US Federal Reserve should not raise the key rate any further, but could even lower it again next year. This weighs on the US currency and leads to higher demand for gold, as the weak US dollar makes the precious metal cheaper for market participants from other currency areas.

Gold price in US dollars in weekly chart – ISIN: XC0009655157


Conclusion Predicting the future price development of gold is difficult, as the gold price is influenced by a variety of factors. We have looked at some factors that could positively influence further rises in the gold price. Undisputedly, however, gold has often gained value in times of economic uncertainty, geopolitical tensions and political instability in the past. In any case, it currently appears attractive to expand the gold share in the portfolio.