October 4, 2024 (Globalinvestorideas.com Newswire) Globalinvestorideas.com, a go-to platform for big investing ideas releases market commentary from Antonio Ernesto Di Giacomo – Senior Market Analyst at XS.com.
In the past week, the price of gold reached a new all-time high, surpassing $2,685.00 per ounce. This increase has been driven by global uncertainties that have shaken financial markets, including tensions in the Middle East, fears of a military conflict, and the U.S. presidential elections. Additionally, concerns about U.S. debt and fiscal deficit have strengthened the demand for safe-haven assets like gold, which is seen by many as a refuge in times of volatility.
A key factor behind this rise has been the monetary policy adopted by the U.S. Federal Reserve. The institution has begun a cycle of monetary easing and lowering interest rates, which reduces the opportunity cost of holding gold. This has led many investors to seek refuge in the precious metal amid expectations that interest rates will continue to decline. It is estimated that the price of gold could reach $2,700.00 per ounce by December 2024, reflecting a sustained increase in its value.
On the other hand, gold demand has grown significantly in several markets, especially in unorganized markets and U.S. futures contracts. Gold ETFs, which had seen two years of outflows, have experienced a resurgence in demand. However, official demand from central banks has decreased due to the current high metal prices. Despite this, countries like Poland, India, and Turkey have continued to purchase gold, keeping governmental interest in this asset alive.
Despite strong demand, short-term risks could affect gold’s price trajectory. Speculation about future interest rate cuts by the Federal Reserve could lead some investors to reduce their positions in gold. Likewise, physical gold demand in China has declined due to high prices and weak domestic consumption. Nevertheless, this scenario could change depending on the outcome of the U.S. elections, especially if former President Donald Trump returns to power and imposes tariffs on Chinese products, which could revive gold demand in Asia.
In summary, despite short-term risks, global demand for gold remains strong, particularly in Asian countries like India. The price stability will largely depend on the evolution of geopolitical tensions, U.S. monetary policy, and the behavior of international financial markets. Gold is expected to remain attractive for those seeking protection against economic uncertainty.
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