The gold market continues to show strong momentum, reaching a new all-time high this week. The spot price of the yellow metal surpassed US$2,660 per ounce for the first time during the September 24th session, driven by a combination of economic and geopolitical factors that continue to boost its demand as a safe-haven asset.
By Panorama Minero
One of the main drivers behind the rise in gold prices is the expansive monetary policy of the U.S. Federal Reserve. The recent 50-basis-point interest rate cut, larger than expected, has sparked expectations of further cuts in the coming months. In fact, according to the president of the Federal Reserve Bank of Chicago, this could be just the beginning of a series of cuts that may continue until 2025. This has lowered the opportunity cost of holding gold, making it an attractive option for investors seeking a safe haven in the face of an uncertain economic outlook.
High prices suggest that investors see gold as an appealing investment option given the current market conditions. In an environment characterized by low returns on other forms of investment and the depreciation of the dollar, gold is positioning itself as a safer and potentially more profitable alternative.
Simultaneously, economic measures adopted by China have also had a significant impact. The Chinese Central Bank announced an unprecedented stimulus package, dating back to the start of the pandemic, aimed at revitalizing its economy and mitigating the risk of deflation. While these stimuli may also benefit other assets, such as Chinese stocks and the real estate market, lower interest rates have given a new boost to gold demand.
Geopolitics and the Search for Safe-Haven Assets
At the same time, the prolonged instability in the Middle East, particularly the conflict between Israel and Hezbollah in southern Lebanon, has contributed to increased demand for gold as a safe asset. With geopolitical tensions rising and the possibility of escalating conflicts in the region, investors are seeking refuge in assets like gold, which has surged 27% so far this year. Looking ahead, geopolitical risks and a structural deficit in gold supply could continue to push prices higher in the medium term.
Opportunities and Risks Ahead
Despite the prevailing optimism, experts also warn of potential corrections in gold prices. A faster-than-expected global economic recovery could reduce the need for refuge in gold, leading to a drop in demand. However, if geopolitical risks and inflationary concerns persist, gold could continue to benefit from its status as a safe investment.
For now, all eyes are on the upcoming statements from Jerome Powell, Chairman of the U.S. Federal Reserve. If the Fed's actions reinforce the view of a more relaxed monetary policy, it is likely that gold prices will continue their upward trend.
