The price of gold has risen to a historic high, exceeding $2,870 per ounce, as a result of active purchases by central banks, inflation fears and geopolitical risks, UNN reports with reference to Euro News.
According to media reports, the trade duties imposed by the Donald Trump administration gave an additional impetus to the rise in gold prices, which contributed to the increased demand for safe-haven assets.
Gold is showing rapid growth, exceeding its year-to-date level by 10%, a rate not seen since 1980. This has sparked discussions among investors about the possible start of a new "golden era." Central banks are increasing their reserves, and the aggravation of the geopolitical situation only increases interest in the precious metal.
On Wednesday morning in European trading, the price of gold continued to rise, exceeding $2,870 (€2,780) an ounce. Investors, including central banks, are actively buying bullion amid economic uncertainty. This time, the rise in the gold price is driven not only by traditional factors, such as a weaker US dollar or lower bond yields, but also by more fundamental structural changes.
Otavio Costa, macro strategist at Crescat Capital, notes that the world is witnessing a historical lesson in real time about the role of gold. According to him, the current price increase is explained by a set of macroeconomic factors reminiscent of economic crises of the past. In particular, the record level of public debt repeats the situation of the 1940s, while inflationary pressures resemble the challenges of the 1970s. At the same time, extreme valuations of assets in stock markets evoke associations with the financial bubbles of the 1920s and 1990s.
With the US budget deficit rising, manufacturing reviving, and the G7 countries experiencing de-globalization, gold is increasingly seen as a hedge against financial instability. The key driver of the current rally is the unprecedented level of gold purchases by central banks. According to the World Gold Council, in 2024, they purchased more than 1,000 tons of the precious metal for the third year in a row. At the same time, in the fourth quarter, the pace of purchases increased to 333 tons.
Global gold reserves have doubled over the past decade, a trend that is likely to continue due to concerns over fiscal sustainability and geopolitical risks in the United States. Callum Thomas, Head of Research at Topdown Charts, emphasizes that central banks are shifting their reserves to gold amid growing financial threats.
Goldman Sachs predicts further growth in demand for gold, in particular due to the decision to freeze the assets of the Russian central bank in 2022. This led to a fivefold increase in demand for bonds of global central banks on the London over-the-counter market, indicating growing fears of potential financial constraints.
Goldman Sachs maintains an optimistic outlook for gold, calling long positions in this asset the "highest confidence trade" among commodities.
Samantha Dart, an analyst at the bank, believes that gold will remain an effective hedge against risks, including escalating trade wars, oil supply disruptions, and debt crises.
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Trade policy is also contributing to the growth in demand for gold. The Trump administration imposed a 10% tariff on imports from China, which came into effect on February 4. In response, China has introduced countermeasures, including duties on American goods, restrictions on the export of strategic minerals, and antitrust investigations. Goldman Sachs economist Ian Gattius predicts further escalation of trade tensions, including an increase in tariffs on Chinese imports by another 20% and the introduction of new duties on European cars.
Recall
Last week , gold prices rose amid investor concerns about the possible introduction of import tariffs by US President Donald Trump.