A new “rally” for the price of gold, which now exceeds even $4,100 per ounce. The precious metal, after breaking the $4,000 record days ago, continues to “see” its price rising, with estimates even suggesting the possibility of “breaking” the $5,000 barrier. This is something remarkable, with continuing market uncertainty seemingly persisting despite developments in the Middle East, overturning a temporary “decline” in the precious metal’s price that had been brought about by the ceasefire agreement between Israel and Hamas last week, along with the dollar’s rise at that time.
Read: Why gold prices reach record levels – Where the “crazy” rally could end up, what investors fear
The “debasement trade” benefits gold
Rising inflation and debt and the weakening of the US dollar, the federal government shutdown, but also the surge in Wall Street activity, constitute the so-called “debasement trade,” having strengthened all assets beyond stocks and bonds. “All this debasement trade benefits gold,” Amplify ETFs CEO Christian Magoon said days ago, speaking to CNBC about the continuing upward trend.
It’s worth noting that the rise doesn’t only concern gold, but also bitcoin, which are likely treated as safe havens in a market shaped by inflation and political risk. Gold surpassed $4,000 for the first time last Tuesday, reaching a historic high. Bitcoin followed gold in the debasement trade as a digital alternative to traditional currencies. The cryptocurrency reached just above $126,000 earlier this week, marking a new historic high, before falling back below $100,000 however, not proving the same resilience as gold.
Central banks and ETFs driving gold higher
Central bank moves are also “key”: As the BBC reported, central banks have purchased a total of more than 1,000 tons of gold each year since 2022, from an average of 481 tons annually between 2010 and 2021. Poland, Turkey, India, Azerbaijan and China were among the top buyers last year.
Meanwhile, the appreciation is driven by investor decisions, who prefer to invest their money in financial products, such as exchange-traded funds (ETFs), which are backed by gold. A record $64 billion has been invested in gold ETFs so far this year, according to the World Gold Council trade association.
The Fed’s interest rate announcements obviously play their own role, with CNN noting that markets continue to estimate there will be a 0.25% cut at the Fed meeting on October 28-29 and a similar-sized cut at the December meeting. “I believe gold will reach $4,300 per ounce over the next six months, as the US dollar is expected to continue depreciating,” Michael Langford, chief investment officer of Scorpion Minerals, told the American outlet. Billionaire investor Ken Griffin said days ago that gold’s evolution as a safer asset than the dollar is “really concerning.”
