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The gold market is showing an impressive increase in value, with recent price increases showing no sign of slowing down. Despite the rising geopolitical risk in the Middle East, which normally provides a safe haven for investors, the current price increase cannot be fully explained by conventional economic or monetary policy factors. The unexpected spikes in the Gold prices, which contradict the outflows from gold ETFs, have left analysts baffled.
Leading Wall Street banks have nevertheless raised their expectations for the price of gold. Goldman Sachs sees an increase to $2,700 per ounce by the end of this year as achievable, mainly driven by the growing "fear" factors that defy traditional economic indicators. These include concerns about the sustainability of the current monetary system, fears of currency depreciation by emerging market central banks, and concerns about U.S. fiscal stability and the upcoming election.
Bank of America has even set a target price of $3,000 per ounce, partly due to the positive outlook for silver, while UBS makes an even more ambitious prediction with a possible spike to $4,000. UBS believes it is not too late to jump into this wave of price increases, with history showing that gold prices can stagnate for a long time, but then quickly double.
The significant increase in gold prices since mid-2022 is driven by new, incremental factors such as structural fears related not only to economic indicators but also to Geopolitical instability and changes in the demand for safe assets. In addition, the anticipation of interest rate cuts by the Federal Reserve a driving force behind the expansion of Gold purchases, which could further push up prices.
Traditional relationships between gold prices and physically-backed ETFs have been disrupted, while institutional future positions are lagging behind recent highs. All this points to a market that is in a transitional phase, where traditional economic models may no longer be sufficient to explain the current dynamics. This makes future movements in the gold market more unpredictable than ever before.
On Thursday 16 May 2024, Holland Gold will host a event on Gold and world politics in the Georg Kessler Lounge at the AFAS AZ Stadium.
The event consists of three parts: one interview, one presentation and a Q&A session for the audience. For example, the gold rush is discussed in World Politics, the geopolitical tensions that are rising every day; in Ukraine, the Middle East, in West Africa and around Taiwan. What impact does this have on the financial system? Central banks seem to be caught in a gold rush. The yellow metal achieves a Record price. How long will the US dollar remain dominant?
Buy your tickets here: https://www.hollandgold.nl/evenement/
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On behalf of Holland Gold, Paul Buitink and Joris Beemsterboer interview various economists and experts in the field of macroeconomics. The aim of the podcast is to provide the viewer with a better picture and guidance in an increasingly rapidly changing macroeconomic and monetary landscape. Click here to subscribe.
