Gold prices go up again

shed some light on the surge and expectations for the future

On October 18, 2024, gold prices reached a significant milestone, rising to $2,700 per ounce. This marks the highest level for gold in 2024, amid concerns about inflation, recession, and global conflicts. Many investors see gold as a safe-haven asset, particularly during turbulent economic times. This article delves into the reasons for the surge in gold prices, whether it makes sense to invest in gold at this time, and what the future holds for gold investors.

Table of contents

• Highlighting the increasing forces on the prices of gold
• The effect of inflation and looseness of money supply
• Tensions between countries
• The uncertainty of U.S. elections
• Past perspective: observing the behavior of gold prices
  • The 1970s: tool to protect against inflation
  • The 2008 financial crisis
  • The pandemic of COVID-19 and beyond
• Does gold still have an investment rationale?
  • Expert views: gold is the best investment
  • The disadvantages of purchasing gold at a high price
• Prospects of gold prices in the future
  • Monetary policy and interest rates
  • Geopolitical risks
  • The consequences of inflation
• Final thoughts: is gold still worth it?

Highlighting the increasing forces on the prices of gold

The effect of inflation and looseness of money supply

Inflation is a major factor influencing the surge in gold prices in 2024. Many central banks, such as the U.S. Federal Reserve, have adopted loose monetary policies to stimulate economic growth. However, the result has been a persistent rise in inflation, which devalues currencies like the U.S. dollar.

During inflationary periods, investors often turn to gold, as it maintains its value when currencies weaken. Mining.com points out that investors’ trust in gold remains unwavering due to central banks’ struggles with high inflation rates.

Moreover, the decline in the U.S. dollar has made gold more attractive to foreign investors, as a weaker dollar makes gold cheaper for international buyers.

Tensions between countries

Geopolitical tensions have also played a role in pushing gold prices higher. The ongoing trade war between the U.S. and China and the war in Ukraine have fueled uncertainty in global markets. During these times, investors view gold as a hedge against risk.

Maisek (n.d.) noted that political and economic issues have driven up demand for gold, as it is less affected by market shocks than other assets.

The uncertainty of U.S. elections

The upcoming 2024 U.S. presidential election is adding further uncertainty to the economy, which is benefiting gold. During election periods, gold is often favored by investors seeking to protect their portfolios from potential disruptions caused by new policies.

Past perspective: observing the behavior of gold prices

The 1970s: tool to protect against inflation

In the 1970s, the end of the Bretton Woods system and loose economic policies led to double-digit inflation in the U.S. During this period, gold prices surged to $850 per ounce as inflation soared, cementing gold’s status as a hedge against inflation and currency depreciation.

The 2008 financial crisis

The 2008 financial crisis saw investors rushing to gold as a safe-haven asset. By 2011, gold prices reached $1,900 per ounce, largely due to inflation fears and quantitative easing measures by central banks.

The pandemic of COVID-19 and beyond

In 2020, gold prices crossed the $2,000 mark for the first time, driven by the economic impact of the COVID-19 pandemic. The pandemic’s global economic disruption, combined with large-scale stimulus packages, reinforced gold’s role as a secure investment.

Does gold still have an investment rationale?

As gold prices hit record levels, many investors are wondering if it’s still a good time to invest. Expert opinions are divided.

Expert views: gold is the best investment

Some analysts suggest that gold remains a valuable investment even at record levels. CBS News highlights that inflation and geopolitical risks are likely to continue, which will support the price of gold for the foreseeable future.

Gold also has the advantage of being a tangible asset that is not affected by stock market volatility. Unlike stocks or bonds, gold maintains its value during periods of economic instability.

The disadvantages of purchasing gold at a high price

On the other hand, some experts warn that investing in gold at its current high price poses risks. BNN Bloomberg points out that the surge in gold prices has been driven largely by fear and speculation. If inflation eases or geopolitical tensions subside, gold prices could drop, leaving investors with reduced returns.

Moreover, gold does not generate income, unlike stocks or bonds, which pay dividends or interest. This lack of income makes gold less attractive to investors looking for regular returns.

Prospects of gold prices in the future

Monetary policy and interest rates

Central bank policies, particularly those of the U.S. Federal Reserve, will play a critical role in determining the future of gold prices. If central banks raise interest rates aggressively to combat inflation, gold’s appeal could diminish. However, if monetary easing continues, gold prices may keep rising.

Geopolitical risks

Geopolitical conflicts—such as the U.S.-China trade war and the war in Ukraine—are unlikely to resolve soon. As long as these risks persist, gold will remain a popular investment option for those seeking protection from market instability.

The consequences of inflation

Inflation will continue to be a key factor in determining gold’s future price trajectory. If inflation remains high and central banks struggle to control it, demand for gold will likely grow further. However, if inflation stabilizes, gold prices could experience a slowdown.

Final thoughts: is gold still worth it?

Gold prices go up again shed some light on the surge and expectations for the future

The surge in gold prices during 2024 has once again highlighted gold’s role as a safe-haven asset in times of economic uncertainty. Factors such as inflation, geopolitical risks, and election-related uncertainty have pushed gold to record levels.

For long-term investors looking to protect their wealth from inflation, gold remains a solid option. However, given the current high prices, it’s essential to carefully consider the risks and determine whether now is the right time to invest.

As always, diversification is key, and gold should be viewed as part of a broader investment strategy rather than a standalone investment.