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What’s the deal with gold? Gold prices seem to be rushing to the top with unstoppable force, and with good reason. The geopolitical climate in 2024 is turbulent, and with sky-high inflation and rising costs, it's no wonder investors are turning to safe-haven assets such as precious metals. With increased demand comes increased costs, and gold has seen a record year in 2024, going up by 25% since January. Let’s explore the reasons behind the skyrocketing price of precious metals.
While not applicable to America, any country outside of the US has to convert the Spot Price of Gold (in USD) to the currency used by their government. The price of gold would fluctuate based on the exchange rates in their country respectively. Gold prices in Canada are sky-high partially because the Canadian Dollar is currently weak against the American dollar. In October, the exchange rates have not been in favour of Canada. With the diverging interest rates and economic outlooks for the two countries, America has demonstrated to be in better economic shape than Canada, weakening the Canadian dollar against the American dollar. Unfortunately for countries with weak currencies against the American Dollar, gold would be priced astronomically high.
Currently, global tensions are high and investors are turning to gold for its reputation as a safe haven asset. Historically, gold does very well in uncertain times and volatile markets as it has a known inverse relationship with the stock market, cementing its reputation as a safe haven asset. Current ongoing global conflicts in Iran, Gaza, and Ukraine, impact investments across the board and are disrupting financial markets. 2024 is when many elections in North America and Europe are taking place, throwing political stability off-balance. Many investors no doubt have their eye on key elections as uncertainties affect the performance of investments in the stock market. Gold negatively correlates to stock market movement, thus investors use it as a safe haven during uncertain times in stock market performance.
Inflation is the rise in the cost of goods that can undercut the value of your dollar and currently, in 2024, inflation is at an all-time high. Supply chain issues caused by the pandemic and lockdowns such as a lack of mobility, production shutdowns, and manufacturing delays are still affecting the production of goods today. The ongoing geopolitical issues in the Middle East cause ships to detour around the Suez Canal resulting in shipping delays. Changing weather patterns and phenomena, such as rising temperatures and tropical storms disrupt shipping routes and timely deliveries. Consumers also have started spending more after lockdowns lifted, but with delayed shipments and lowered production, companies find it difficult to fulfill the demand leading to price inflation. Gold, however, is an asset that never loses value. It thrives in periods of high inflation, protecting the value of your dollar as a hedge against inflation.
In October, the Federal Reserve announced the first interest rate cut in 4 years and consequently, the price of gold soared even higher. Gold is a non-interest-yielding asset thus low interest rates lower the opportunity cost of holding gold. When the opportunity cost of gold goes down, many investors want to buy gold to add it to their investment portfolios, creating high demand for the metal. However, gold has a limited supply and with the rules of supply and demand, gold's price inevitably increases, allowing it to thrive in a low-interest-rate market.
So what’s up with gold? The current geopolitical climate, economic uncertainty, periods of high inflation, interest rate cuts, and exchange rates are all boosting the power of precious metals while stifling the growth of other forms of investment. Adding precious metals to 10-15% to your investment portfolio is a great way to diversify and protect your financial status in turbulent uncertainties where the stock market is on a downtrend.
What’s the deal with gold? Gold prices seem to be rushing to the top with unstoppable force, and with good reason. The geopolitical climate in 2024 is turbulent, and with sky-high inflation and rising costs, it's no wonder investors are turning to safe-haven assets such as precious metals. With increased demand comes increased costs, and gold has seen a record year in 2024, going up by 25% since January. Let’s explore the reasons behind the skyrocketing price of precious metals.
While not applicable to America, any country outside of the US has to convert the Spot Price of Gold (in USD) to the currency used by their government. The price of gold would fluctuate based on the exchange rates in their country respectively. Gold prices in Canada are sky-high partially because the Canadian Dollar is currently weak against the American dollar. In October, the exchange rates have not been in favour of Canada. With the diverging interest rates and economic outlooks for the two countries, America has demonstrated to be in better economic shape than Canada, weakening the Canadian dollar against the American dollar. Unfortunately for countries with weak currencies against the American Dollar, gold would be priced astronomically high.
Currently, global tensions are high and investors are turning to gold for its reputation as a safe haven asset. Historically, gold does very well in uncertain times and volatile markets as it has a known inverse relationship with the stock market, cementing its reputation as a safe haven asset. Current ongoing global conflicts in Iran, Gaza, and Ukraine, impact investments across the board and are disrupting financial markets. 2024 is when many elections in North America and Europe are taking place, throwing political stability off-balance. Many investors no doubt have their eye on key elections as uncertainties affect the performance of investments in the stock market. Gold negatively correlates to stock market movement, thus investors use it as a safe haven during uncertain times in stock market performance.
Inflation is the rise in the cost of goods that can undercut the value of your dollar and currently, in 2024, inflation is at an all-time high. Supply chain issues caused by the pandemic and lockdowns such as a lack of mobility, production shutdowns, and manufacturing delays are still affecting the production of goods today. The ongoing geopolitical issues in the Middle East cause ships to detour around the Suez Canal resulting in shipping delays. Changing weather patterns and phenomena, such as rising temperatures and tropical storms disrupt shipping routes and timely deliveries. Consumers also have started spending more after lockdowns lifted, but with delayed shipments and lowered production, companies find it difficult to fulfill the demand leading to price inflation. Gold, however, is an asset that never loses value. It thrives in periods of high inflation, protecting the value of your dollar as a hedge against inflation.
In October, the Federal Reserve announced the first interest rate cut in 4 years and consequently, the price of gold soared even higher. Gold is a non-interest-yielding asset thus low interest rates lower the opportunity cost of holding gold. When the opportunity cost of gold goes down, many investors want to buy gold to add it to their investment portfolios, creating high demand for the metal. However, gold has a limited supply and with the rules of supply and demand, gold's price inevitably increases, allowing it to thrive in a low-interest-rate market.
So what’s up with gold? The current geopolitical climate, economic uncertainty, periods of high inflation, interest rate cuts, and exchange rates are all boosting the power of precious metals while stifling the growth of other forms of investment. Adding precious metals to 10-15% to your investment portfolio is a great way to diversify and protect your financial status in turbulent uncertainties where the stock market is on a downtrend.
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