Gold price reaches new all time high

Last week, we already wrote an article about the gold price heading for a new all-time high. This week, news came out that the gold price reached a new record high, partly due to a weak dollar.

Gold price reaches new record high

The price of gold rose to just under $2,200 per troy ounce (31.103 grams) this week. This more than broke the record of $2,075 per troy ounce from the corona era.
The gold price was already on the rise in recent weeks. First of all, geopolitical tensions in the Middle East led to a lot of turmoil in the stock market. Investors then often look for a stable and safe investment, and end up with gold.
In addition, high inflation also plays a role. Gold is seen as a safe investment that rises along with inflation. For this reason, people choose to invest part of their (savings) money in gold to prevent their assets from evaporating in times of high inflation.
Moreover, financial markets are speculating that the US Federal Reserve may cut interest rates as early as March. Despite Fed chairman Jerome Powell stating on Friday that US interest rates are now ‘well into restrictive territory’, which is seen by markets as a sign that interest rates could be cut, Powell stressed that it is too early to speculate on a rate cut. Lower interest rates tend to weaken the dollar, this makes gold cheaper for traders with another currency resulting in more demand, which drives the price.

Gold price forecast 2024

A survey by the World Gold Council showed that 24% of central banks plan to increase their reserves in the next 12 months. In addition, central banks' views on the future role of the US dollar were more pessimistic than in previous surveys. In contrast, views on the future role of gold were more optimistic, 62% said gold will have a larger share of total reserves compared to 46% last year.
The survey shows that a majority of central banks expect a slight increase in the share of total reserves denominated in gold over the next five years, with emerging economies mainly driving this view. The main factor in organisational decisions to hold gold remains its historical position, the survey shows.

Thereby, seven in 10 central banks surveyed believe that gold reserves will increase over the next 12 months, up 10 points from last year.

Hedge fund investor Paul Tudor Jones shared on CNBC's Squawk Box that we are currently navigating through ‘the most threatening and challenging geopolitical environment, at a time when the United States is struggling with its weakest fiscal position since World War II’. He advised that gold ‘should probably be a bigger part of your portfolio than in the past’. If the Federal Reserve opts for earlier interest rate cuts, Bank of America has predicted that gold could end up at an impressive $2,400 per troy ounce this year.

Sources

• “DPG Media Privacy Gate”, 4 december 2023, https://www.parool.nl/nederland/zwakke-dollar-stuwt-goudprijs-al-wekenlang-omhoog-hoogste-niveau-ooit-bereikt~b9a67d87/?referrer=https://www.google.com/.
• Myrthe Koopman, “Goudprijs gaat door het dak, maar ‘niet al het goud is evenveel waard’”, bnr.nl, 5 december 2023, https://www.bnr.nl/nieuws/financieel/10533904/goudprijs-gaat-door-het-dak-maar-niet-al-het-goud-is-evenveel-waard.
• “FX Weekly – Meer range-trading in het verschiet voor EUR/USD”, ABN AMRO Bank, 11 november 2023, https://www.abnamro.com/research/nl/onze-research/fx-weekly-meer-range-trading-in-het-verschiet-voor-eur-usd.
• “DPG Media Privacy Gate”, 4 december 2023, https://www.ad.nl/economie/goudprijs-stijgt-naar-hoogste-niveau-ooit-meer-dan-2100-dollar-per-ruim-30-gram~a5b32050/.
• NOS, “Goudprijs bereikt recordhoogte”, NOS, 4 december 2023, https://nos.nl/artikel/2500302-goudprijs-bereikt-recordhoogte.
• World Gold Council, “2023 Central Bank Gold Reserves Survey”, World Gold Council, 30 mei 2023, https://www.gold.org/goldhub/data/2023-central-bank-gold-reserves-survey.
• Euronews, “Gold’s Glittering Comeback: 2024 Outlook Shines Bright as Fed Rate Cuts Loom”, Euronews, 29 november 2023, https://www.euronews.com/business/2023/11/29/golds-glittering-comeback-2024-outlook-shines-bright-as-fed-rate-cuts-loom#:~:text=If%20the%20Federal%20Reserve%20indeed,prospect%20for%20investors%20in%202024.