Gold prices have broken through the $2,500 an ounce mark to $2,531, a new record high. Growing hopes of a rate cut by the US Federal Reserve could be behind the move. Investors seeking safety in gold (who have been moving away from Bitcoin and other cryptocurrencies) have been driven by fears of an economic collapse.
Variables at play in the rise in the price of gold
The surge in gold prices can be explained by several factors taken together. The anticipation of lower interest rates contributed to the fall in the US dollar, which also increased the attractiveness of gold to foreign investors. Holding unprofitable assets like gold carries a loss of opportunity cost when the dollar falls, leading to increased buying activity.
This situation was observed in which most experts demanded, in agreement with many other market observers, prospective rate cuts of 25 basis points from the Federal Reserve at its September conference.
In addition to the monetary policy outlook and geopolitical concerns, particularly in the Middle East, demand for gold as a safe haven asset has increased. Gold has become even more attractive as investors seek protection from ongoing conflict and economic turmoil. This has resulted in a notable increase in holdings of gold-backed exchange-traded funds, which have reached a seven-month high.
Gold Outperforms Bitcoin
Bitcoin simply can’t hold up where gold has been going. Increasing regulatory hurdles and increased scrutiny have weighed on the bitcoin market, dampening investor enthusiasm. Conversely, gold seems to be one of the reasons it has performed so well recently, as it serves as a classic safe haven in times of uncertainty and attracts more money.
Compared to the much-touted gold, bitcoin hasn’t performed as well as the traditional metal in recent years. The cryptocurrency has fallen 16% from its all-time high of $73,740 in March.
Although bitcoin offers great profits, most investors today are looking for stability and security, which is the case with gold. In this context, their different performances highlight a clear change in investor sentiment, especially in a still volatile economic environment.
Image: DALL-E
Future signals
Market watchers have already begun looking for signals from the Federal Reserve as gold prices soar. Most in demand will be guidance on future monetary policy, which Fed Chairman Jerome Powell will be eagerly awaiting at the Jackson Hole symposium.
Investment institutions like UBS are already saying that if trends continue, gold could reach $2,600 per ounce by the end of 2024. Falling interest rates and ongoing geopolitical concerns will surely keep gold in demand and position it as a store of value.
The current rise in gold prices above $2,500 per ounce marks a historic turning point in investment attractiveness. Driven by rising geopolitical tensions and interest rate expectations, gold remains a top choice for those seeking safe investments.
While gold’s outlook remains bright, thanks in part to the Federal Reserve’s new guidance, Bitcoin’s outlook is not. This development only reinforces the fact that gold remains a viable and stable investment in turbulent times.
Featured image from Pexels, chart from TradingView
