As of: March 13, 2024, 6:08 a.m
By: Lars-Eric Nievelstein
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The price of gold is rising significantly.
Even the experts are unsure what the problem is.
What do emerging markets have to do with it?
Frankfurt – Buyers currently have to pay $2,183 per troy ounce (March 12, 2023) if they want to buy gold.
The precious metal has had a multi-day upswing.
Experts disagree about what could have triggered this price development, but one factor is said to be the war in the Gaza Strip.
However, some countries are reportedly also calculating new sanctions.
Gold price rises – prospect of low interest rates as a trigger?
“There is no clear trigger this time.” The
Handelsblatt
quoted UBS analyst Giovanni Staunovo, who is by no means alone in this opinion.
It is unclear what triggered the current “gold rush”.
However, there are various triggers that interact with each other.
One of them is US Federal Reserve Chairman Jerome Powell.
He had recently indicated that new interest rate cuts could be expected soon.
Christine Lagarde of the European Central Bank made similar comments.
1 kg of gold bars worth approx. 60,000 euros each.
The price of gold is rising significantly.
Even the experts are unsure what the problem is.
What do emerging markets have to do with it?
© IMAGO / Sven Simon
Such approaching interest rate cuts usually provide a boost to gold prices.
Conversely, high interest rates put a strain on the investment because gold does not generate any ongoing income.
In this case, storing the gold costs more.
Gold as a crisis currency – central banks strike
Another driving factor was global demand.
The
World Gold Council
had already reported at the end of January that gold was becoming more popular on the global market.
"Central banks' unwavering demand continued to support gold demand this year and helped offset weakness elsewhere in the market, keeping demand well above the 10-year moving average in 2023," the WGC said.
The council cited geopolitical uncertainty as a driver for demand.
“We expect this to have a significant impact on the market in 2024.” In addition to the ongoing conflicts, trade tensions would prompt investors to buy gold.
This is considered a safe haven for investors in times of crisis.
According to the Observatory of Economic Complexity (OEC), Switzerland is the top importer, but several emerging markets are currently among the largest buyers of gold.
These include China (14.1 percent share of all purchases), the United Arab Emirates (11.9 percent) and India (7.49 percent).
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“If it is my gold, I want it in my country”
Fears of sanctions are also driving the massive move of gold reserves.
The Invesco Global Soverein Asset Management study from 2023 showed that many central banks are withdrawing their gold from abroad and storing it at home instead.
The reason: concerns about the West freezing Russian gold and foreign exchange reserves.
In total, Western countries have set aside 640 billion euros, an unprecedented move.
The conclusion seems simple: if, for example, Chinese gold is stored in China instead, the West cannot freeze it.
However, the question arises as to whether the affected countries expect to soon find themselves in a similar situation to Russia.
"'If it's my gold, then I want it in my country,' was the mantra we've seen over the last year," Reuters quoted
Rod
Ringrow, head of official institutions at Invesco, as saying.
Futures exchange influences gold price
And most recently, some analysts see trading on the New York futures exchange Comex as a reason for the rising gold price.
There was “presumably” an increase in so-called long positions (bets on rising prices), while short positions (bets on falling prices) had decreased.
When shorting, investors borrow assets, sell them, and expect to be able to buy them back cheaper later.
This works for stocks or gold, for example.
If they are correct, they make a profit - minus a rental fee.
Many experts seem to agree on one thing.
According to the Handelsblatt, after such an upswing there will be a correction, i.e. a drop in the price of gold.
With material from Reuters