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Gold Price Rise: Geopolitical & Dollar Factors



  Jun 22, 2024

Gold Price Rise: Geopolitical Uncertainty and Dollar Diversification



Gold prices have surged to new heights amid rising geopolitical uncertainties and a strategic shift away from the US dollar. The World Bank’s April 2024 edition of the Commodity Market Outlook provides a detailed analysis of these trends and their implications.

KEY FACTORS DRIVING THE GOLD PRICE INCREASE

1. Geopolitical Tensions:

• Gold reached an all-time nominal high of $2,331 per troy ounce in April 2024.

• Heightened geopolitical tensions have increased demand for gold as a safe-haven asset.

2. Central Bank Purchases:

• Record buying by central banks in emerging markets and developing economies (EMDEs) has significantly bolstered gold demand.

• Notably, China’s central bank extended its gold purchases for the 17th consecutive month in March 2024.

3. Diversification from the Dollar:

• Countries like China, India, and Türkiye are diversifying their reserves away from the US dollar, increasing their gold holdings.

• This strategic move is driven by a desire to reduce dependency on the dollar amid global economic uncertainties.

4. Strong Retail Investment:

• In several countries, gold jewelry serves as a quasi-investment, further supporting demand.

• Retail investment in gold has remained robust, driven by economic instability and currency fluctuations.

5. Exchange-Traded Funds (ETFs) Activity:

• Increased activity in gold ETFs, particularly in China, has contributed to the price surge.

• ETFs offer a convenient way for investors to gain exposure to gold without owning the physical metal.

OTHER PRECIOUS METALS TRENDS

Silver:

• Prices surged by 12% in April 2024, driven by recovering industrial activity and factors similar to those affecting gold.

• Anticipated growth in industrial demand and mine production is expected to support silver prices, with a 7% increase projected for 2024.

Platinum:

• Platinum prices rebounded by 3.5% in April 2024 after a slight dip in the first quarter.

• Despite a moderation in demand growth, reduced production from major producers like Russia and South Africa supports prices, with a 4% increase expected in 2024.

FUTURE OUTLOOK

• Gold: Expected to be 8% higher in 2024 compared to 2023, supported by continued demand from EMDE central banks and retail investors.

• Silver and Platinum: Both metals are forecasted to see price increases in 2024 and 2025, driven by industrial demand and supply constraints.

CONCLUSION

The surge in gold prices is a result of multiple factors, including geopolitical uncertainties and a strategic diversification from the US dollar. These trends underscore the ongoing importance of gold as a stable and valuable asset in times of global instability.




SRIRAM’S



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