Why is gold prices rising?
Gold prices continue to rise to an unprecedented high in recent days, breaking a new record every day. On September 26, the world spot gold price was at 2,657.7 USD/ounce. Gold futures last traded at $2,681.40 an ounce. Overall, gold prices have risen nearly 30% this year.
The AP points to a few factors behind the recent gold price increase.
Interest in buying gold often comes at times of uncertainty for example, potential concerns about inflation and the strength of the US dollar have prompted some to look for an alternative to store their money. Gold also surged in the early days of the COVID-19 pandemic.
One of the sources of unrest today is geopolitical tensions which have escalated in recent days with deadly Israeli airstrikes in Lebanon. Ongoing wars in Gaza and Ukraine continue to fuel fears about the future around the world.
Last week, the US Federal Reserve (FED) cut interest rates by 0.5%, signaling that there will be many more interest rate cuts before the end of the year. The move comes amid a volatile US presidential election year which could also play a key role in future economic policy.
Analysts also pointed to strong demand from central banks around the world. Joe Cavatoni, senior market strategist at the World Gold Council, noted last month that central bank demand for gold is much higher than the 5-year average - reflecting "increased concerns about inflation and economic stability".
Recent stimulus measures in China to boost consumer spending are also expected to boost retail investment, thereby boosting gold's performance, said Michel Saliby - senior market analyst at FxProSaliby.
Is gold worth investing in?
Proponents of gold investment call gold a "safe haven", arguing that the commodity could help diversify and balance your portfolio, as well as mitigate possible future risks. Some people also feel comfortable when buying something tangible that is likely to increase in value over time.
However, experts warn against putting all your eggs in one basket.
Both retail and institutional investors should not be affected by the FOMO effect (fear of missing out on opportunities in the face of the crowd) - expert Michel Saliby noted and explained that people should not risk all their money just to see others making a profit. He advises investors to monitor the market and always have a clear risk management strategy.
If geopolitical tensions ease, Saliby expects gold prices to correct slightly, possibly falling by around $50 to $80. But he remains optimistic about the near future he expects spot gold prices to soon surpass the $2,700/ounce mark as previously predicted for 2025 and could reach $2,800 or $2,900.
