Gold prices are posting sharp gains and are hitting record highs even as world markets experience mild recessions, hyper-inflation, and geopolitical uncertainty. In fact, all the instability may be causing gold to hit its peak.

Along with record gold prices, the price of other precious metals such as silver are posting strong gains as well. These commodities are seeing increased purchase acquisitions following reports of a mild U.S. inflation.

Technically, the gold futures bulls have the strong overall near-term technical advantage. A six-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close in June futures above solid resistance at $2,300.00.

Gold price by GoldBroker.com

Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $2,200.00. First resistance is seen at the overnight contract high of $2,286.40 and then at $2,300.00.

Peter Grosskopf, head of the financial advisory firm SCP Resource Finance LP, said it’s “very difficult” to predict gold prices on a weekly or daily basis. Grosskopf also credited the “big rise” and the “big selloff” to “technical trading.”

Grosskopf added the ongoing positive trend for gold is “undeniable” and something he expects to continue for the foreseeable future.

The overall market interest in the long term investment of gold is certainly understandable since gold has been on the rise for some time.

it was only 2023, the cumulative average price for gold was about US$1,800 per ounce. In 2024, that average is expected to reach US$1,950. In 2019, it was about US$1,392, reflecting a 40 per cent increase in just four years.

The real question is for many speculators is, why has gold been on the rise and how long will it continue to increase in value. To understand the answers to these questions, it’s important to look at some core factors for the demand in gold and evaluate if these factors will cease or increase.

Factors Increasing Value of Gold

Traditionally, gold has been viewed as a safe investment as opposed to company stock, national currencies and even cryptocurrencies. This finite asset is generally turned to by both institutional investors as well as simple market speculators.

Factor 1: When the stock market is perceived as questionable in the short to medium term, gold becomes a strong investment.

Factor 2: When people are unsure about the future of the economy, gold is purchased because it manages to maintain its value.

Factor 3: Global market instability pushes the demand for gold higher, in sight of record national debt in many countries such as USA.

Factor 4: It also becomes a hedge against other currencies such as USD or cryptocurrencies such as Bitcoin.

Factor 5: because Gold is a hard asset it has less depreciation potential than other assets, such as stocks or crypto assets.

But that doesn’t mean gold is immune from market pressures. Like every other metal, stocks and financial assets everything has its cycles.

For example, gold lost more than a quarter of its value between October 2012 and July 2013. Analysts back then attributed the fall to factors such as a positive stock market and a recovering United States economy.

A decade later, global economists and financial analysts speculate the situation is much different than before. Factors influencing the price of gold indicate a positive run for the next few years, with potential for many more “records” to be set.

These factors as mentioned earlier primarily include the price of the U.S. dollar, interest rates, inflation, geopolitical concerns and general global risk sentiment are all reasons for the record gold prices.

USD Implications on Gold

Generally speaking, a rise in U.S.D value makes it more expensive to buy gold in other currencies. Which in turn eventually leads to fewer buyers of gold. Which then will lower the demand and a lower price in theory.

However, the reverse process is happening currently with the value of the U.S. dollar starting to drop in value over the next few years as interest rate adjustments are made.

Analysts expect the U.S. dollar to decrease for 2024 and even 2025, as the United States Federal Reserve starts cutting rates to pre-pandemic levels. 

Lower interest rates in USA could mean more access to cash. This is not only trie for the American economy but also the global economy as a whole, which will result in a weaker U.S. dollar and higher demand for gold.

There has been a lot of uncertainty linked to the interest rate announcements in 2024 for the United States of America.

Questions about whether there will be a rate increases or rate holds or rate decreases often dominate discussions in American media as well as global markets.

A decrease in interest rates in 2025 could lead to lower investments in US bonds and fixed-income securities, which could also lead to a significant increase in the demand for gold both in the U.S, and globally. 

In addition, global market instability from ongoing wars in the Middle East and Europe, cyberattacks from bad actors in Russia, China, or Iran can add to the risk sentiment. Since gold tends to maintain its value over time, investors look to increase their allocation of the commodity to minimize risks that regional instability could have on the global economy.

The Golden Alternative

Of all the reasons behind gold’s price, the role played by central banks across the globe to acquire the asset to leverage their positions have resulted in gold’s positive performance thus far.

Central banks have re-engineered their asset acquisition strategy to hold gold as an alternative reserve currency, as opposed to U.S.D.

Some Central banks seem to be stocking their foreign exchange reserves for potential crises. We see countries like China, Turkey and Russia stocking their balance sheets with gold as an alternative asset.

Future of Gold

Many expect the price of gold to continue rise for the foreseeable future. A trend will see the one sector that will continue to appreciate which is the gold mining industry.

Canada is home to approximately fifty percent of the world’s public mining companies. With many of the companies producing and exploring gold both in Canada and around the world. A higher price for gold would mean more profit for these specific companies.

With an unstable economic global outlook that appears to be more chaotic by the day, the price of one of the world’s most sought after precious metals has not only held its value but seeks to make record gains in by 2025.