Gold followed Bitcoin this week with a test of the all-time high.
GOLD – Daily Chart
Gold was trading above $2,128 on Tuesday, with a break above the $2,070 level, leading to another surge. There should be some buyers on any pullback toward that level.
The price of gold was testing new highs across a range of currencies with investor fears over tensions in the Middle East and speculation that US interest rates will be cut by the summer.
Investors jumped into the “safe haven” asset on Tuesday, with the spot price reaching a record $2,141.59 an ounce, more than the previous record of $2,135 in December, before easing back again to about $2,128.
The US Federal Reserve is widely expected to cut interest rates from a 23-year high, and gold as a non-yielding asset is more attractive as rates fall.
It may take a long time for rates to get back to a low point, and with the ongoing conflict in Ukraine, there is no promise that they will ever get back to the near-zero levels of pre-2022.
Patrick Farrell, CEO at Charles Stanley, argued that the price of gold would peak soon. He said: “It has been a grim year for many commodities. A confluence of weakening economic growth, particularly from China, plus an adjustment after some post-pandemic exuberance, has seen the prices for energy, industrial metals and ‘energy transition’ commodities such as copper and nickel drop”.
“Gold, in contrast, has reached new highs as geopolitical tensions have increased. This situation may be about to reverse.”
Farrell said current tensions were now “priced in” to the current gold price and that returns on other investments were rising, meaning gold would likely fall.
Billionaire investor Warren Buffett is not a fan of gold, saying in a previous speech. Gold “gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
With geopolitical fears and central bank buying, the current trajectory in gold is higher.
