What will happen with gold… Driving factors in the global market

Today’s market analysis on behalf of Antonio Ernesto Di Giacomo – Market Analyst Latam at xs.com

29th April 2024: The gold market has witnessed a slight decline after five consecutive weeks of gains, raising questions about this precious metal’s stability and future direction. However, various factors suggest that this decrease could be temporary and that gold still maintains an upward path ahead.

One of the main events that influenced this decline was the easing of tensions in the Middle East. Geopolitical stability often has a significant impact on the price of gold, and a decrease in regional tensions can lead to a reduction in demand as a haven. However, this factor does not seem sufficient to halt the overall bullish trend of gold.

A crucial element still supporting the price of gold is the sustained demand for bullion by central banks worldwide. The People’s Bank of China, among others, has been increasing its gold reserves, indicating continued confidence in this metal as a store of value. Furthermore, investors’ search for safe havens, especially in times of economic uncertainty and market volatility, remains a significant driver for the price of gold.

Hedging against inflation is another critical factor driving gold demand. In an environment where investors are concerned about the risk of increasing inflation, gold is perceived as an adequate protection against currency devaluation and erosion of purchasing power. This perception has kept interest in gold as an investment asset, especially at a time when the monetary policies of some countries may increase the risk of inflation.

Despite some doubts about the subsequent rise in the price of gold, especially regarding macroeconomic prospects and US monetary policy, the underlying fundamentals remain solid. ETF demand may have been weak in specific periods, but recent inflows into US and Asian ETFs suggest a shift in trend, which could drive the price of gold in the near future.

In conclusion, although some uncertainties are on the horizon, gold maintains its appeal as a haven asset and hedge against inflation. With central banks’ demand for bullion, investors’ ongoing search for safe havens, and concerns about inflation, gold is likely to continue its upward trend in the second half of the year, with the potential to reach $2,500 per ounce.

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