Apr 10, 2024
Gold price has been on a tear, shattering records for the past seven trading sessions. In the international market, gold is currently trading at a dazzling $2,364 per ounce, buoyed by a confluence of positive factors that have investors feeling optimistic.
Prices have been surging for the past year, currently sitting 16.5% higher than this time last year. What's behind the rally? Several factors are fueling the fire.
One key driver is anticipation of a Federal Reserve interest rate cut. When interest rates fall, gold becomes more attractive to investors compared to other investments that pay interest, like bonds. This is because gold itself doesn't generate income, so falling interest rates make it a relatively more appealing option.
Another factor is China, the world's second-largest economy. As China looks to diversify its holdings away from the US dollar, it's been buying up gold. This increased demand from a major player is helping to push gold prices even higher.
Reuters reported that the People’s Bank of China bought gold for the 17th straight month in March, and added 160,000 ounces that took its reserves to 72.74 million troy ounces of gold.
An April 9 Capital Economics research note stated that investors in China are buying gold as the value of other assets such as real estate has downed in recent years.
Countries such as India and Turkey are also beefing up their gold reserves.
The heavy buying of gold is reducing countries’ dependence on dollars — one of the major currencies in the world and the crucial means to international trade.
This would also circumvent the vulnerability to economic sanctions, a JPMorgan research note stated, quoted by CNN.
Experts believed that the oil price surge also drives inflation, motivating people more to invest in gold — another factor driving the demand.
