Gold's Explosive Growth - Why is the Price of Gold Rising? | MintedMarket

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Gold's Explosive Growth - Why is the Price of Gold Rising?

Gold's Explosive Growth - Why is the Price of Gold Rising?

Gold's Explosive Growth - Why is the Price of Gold Rising?

With the recent spike in gold prices followed by silver, the precious metals market has been a hot commodity amongst investors this past month. Gold and silver prices reached a record amount of growth in the latter half of March beginning April, climbing over 15% in the last 3 months. The highest price gold has ever traded was witnessed on Friday, April 12, after hitting a record $2431 USD per ounce. For outsiders looking in, it seems that gold hit its stride out of nowhere, but seasoned precious metal investors know that current macro factors are adding up and adding fuel to gold’s fire. To answer the one question behind the explosive growth of precious metals, consider these 3 factors in the current environmental landscape. 

Increased Gold Demand 


Following supply and demand and logistics, the more in demand an item is, the more the price for it increases. This is especially true for scarce items, like gold with a fixed amount that cannot be created. The demand for gold has gone up steadily through the years and now it seems like everyone ranging from shoppers at Costco to powerful central banks is rushing to invest in gold and this gold rush is squeezing gold prices higher and higher. Costco reportedly saw precious metal sales well into the hundreds of millions ever since the retailer started offering gold bars in October 2023. Central banks from countries that are not aligned with the U.S. are looking for ways to diversify away from the U.S. dollar to ease up the reliance on the U.S. economy. As gold is a way to hedge against inflation, a force which decreases the buying power of fiat currency, central banks led by China are buying up gold in metric tons to move away from the waning reliance on the U.S. dollar. On the same level, Chinese investors are turning to gold as an alternative amid property price downturns. 

Interest Rate Cuts 


Investors who are anticipating an interest rate cut announcement in June from the Federal Reserves, are driving up the gold prices. Since the start of 2024, the higher-than-expected inflation data have alerted officials to watch with caution and cut interest rates. Investors were hoping for an early rate cut in March, but as time passed, it was evident that the Fed was determined not to reduce interest rates prematurely. Investors are now hoping for a rate cut in June and gold prices are riding the wave of anticipation as we inch closer to June. When interest rates are cut, it lowers the opportunity cost for investors to hold gold since gold is not an interest-yielding asset. If interest rates are high, interest-yielding assets such as stocks and bonds are more attractive to investors to purchase. With the looming interest rate cuts around the corner, holding gold is slowly becoming a more attractive investment option for investors interested in diversifying their portfolios, adding a hedge against inflation.

Geopolitical/Economic Tensions and Uncertainty 


Gold has a reputation of being a hedge against inflation, holding its value when the value of fiat currency fluctuates. Therefore, in times of geopolitical and economic uncertainty, when the value of fiat currency plummets, gold holds its ground and becomes even shinier in the eyes of investors. Uncertainties surrounding the political landscape are rising with 60 countries holding elections this year, including the U.S. holding a presidential election. The unpredictability of the political landscape in 2024 is driving investors to turn to gold as a safe haven asset. Adding to the political uncertainties, there are also political tensions around the world adding fuel to gold’s fire. Tensions in the Middle East as well as Ukraine are increasing investor concerns about hedging against inflation and riskier investments. Generally in riskier markets with high political tensions, investors flee from riskier investment options like stocks, moving their wealth into perceived safe-haven assets such as gold and bonds. 

Summary 


With the current spike in prices, precious metals are proving their worth in gold. A reliable store of value over the long term, gold doesn’t lose its monetary value to inflation and the precious metal will always hold intrinsic value. Diversify your portfolio and hedge against inflationary periods with investments in gold and silver!

With the recent spike in gold prices followed by silver, the precious metals market has been a hot commodity amongst investors this past month. Gold and silver prices reached a record amount of growth in the latter half of March beginning April, climbing over 15% in the last 3 months. The highest price gold has ever traded was witnessed on Friday, April 12, after hitting a record $2431 USD per ounce. For outsiders looking in, it seems that gold hit its stride out of nowhere, but seasoned precious metal investors know that current macro factors are adding up and adding fuel to gold’s fire. To answer the one question behind the explosive growth of precious metals, consider these 3 factors in the current environmental landscape. 

Increased Gold Demand 


Following supply and demand and logistics, the more in demand an item is, the more the price for it increases. This is especially true for scarce items, like gold with a fixed amount that cannot be created. The demand for gold has gone up steadily through the years and now it seems like everyone ranging from shoppers at Costco to powerful central banks is rushing to invest in gold and this gold rush is squeezing gold prices higher and higher. Costco reportedly saw precious metal sales well into the hundreds of millions ever since the retailer started offering gold bars in October 2023. Central banks from countries that are not aligned with the U.S. are looking for ways to diversify away from the U.S. dollar to ease up the reliance on the U.S. economy. As gold is a way to hedge against inflation, a force which decreases the buying power of fiat currency, central banks led by China are buying up gold in metric tons to move away from the waning reliance on the U.S. dollar. On the same level, Chinese investors are turning to gold as an alternative amid property price downturns. 

Interest Rate Cuts 


Investors who are anticipating an interest rate cut announcement in June from the Federal Reserves, are driving up the gold prices. Since the start of 2024, the higher-than-expected inflation data have alerted officials to watch with caution and cut interest rates. Investors were hoping for an early rate cut in March, but as time passed, it was evident that the Fed was determined not to reduce interest rates prematurely. Investors are now hoping for a rate cut in June and gold prices are riding the wave of anticipation as we inch closer to June. When interest rates are cut, it lowers the opportunity cost for investors to hold gold since gold is not an interest-yielding asset. If interest rates are high, interest-yielding assets such as stocks and bonds are more attractive to investors to purchase. With the looming interest rate cuts around the corner, holding gold is slowly becoming a more attractive investment option for investors interested in diversifying their portfolios, adding a hedge against inflation.

Geopolitical/Economic Tensions and Uncertainty 


Gold has a reputation of being a hedge against inflation, holding its value when the value of fiat currency fluctuates. Therefore, in times of geopolitical and economic uncertainty, when the value of fiat currency plummets, gold holds its ground and becomes even shinier in the eyes of investors. Uncertainties surrounding the political landscape are rising with 60 countries holding elections this year, including the U.S. holding a presidential election. The unpredictability of the political landscape in 2024 is driving investors to turn to gold as a safe haven asset. Adding to the political uncertainties, there are also political tensions around the world adding fuel to gold’s fire. Tensions in the Middle East as well as Ukraine are increasing investor concerns about hedging against inflation and riskier investments. Generally in riskier markets with high political tensions, investors flee from riskier investment options like stocks, moving their wealth into perceived safe-haven assets such as gold and bonds. 

Summary 


With the current spike in prices, precious metals are proving their worth in gold. A reliable store of value over the long term, gold doesn’t lose its monetary value to inflation and the precious metal will always hold intrinsic value. Diversify your portfolio and hedge against inflationary periods with investments in gold and silver!

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