Gold embraces history again … How does everything come together to support the metal?


Direct – Sally Ismail: The price of gold exceeded the $ 1900 mark for an ounce for the first time since 2011, to enable it to achieve the highest settlement in its history by the end of last Friday’s session.

Recently, a number of factors joined forces to support the price of the precious metal, which is around the corner from recording the highest level in its history, being a safe haven in times of tensions and turmoil.

Gold hit a record high of $ 1910.73 an ounce on September 5, 2011, but it passed on July 24, 2020 $ 1,900 an ounce barrier For the first time since 2011 before recording a record settlement for the same session.

In addition to Corona crisis and its repercussions, There are other things that push investors towards the yellow metal as a safety bulb, and on top of it Relationships worsen Among the two largest economies around the world for the worse.

The US-China relationship witnessed a new curve, when Beijing decided to take Retaliatory measures in response On Washington’s request to close the Chinese consulate in the American city of Houston, where China announced the same thing, but in Chengdu, China.

This was not a conflict The first of its kind Which raises concern among investors and drives them to prefer safe assets, as both countries engage in commercial and political quarrels over restricting freedoms in Hong Kong and a third related to causing the spread of the “Covid-19” virus globally.

و .ضفى These clashes escalated Among the world’s two largest economies, more fuel is in demand for safe haven, which boosts the metal’s appeal, to a new high in nine years.

Moreover, there are more factors driving the gold price such as Weak US currency And that is trading near its lowest level in 22 months, as well Stimulus measures Worldwide.

And gold benefited from The weak performance of the dollarThe main dollar index, which tracks the performance of the U.S. paper against 6 major currencies, is at its lowest level since late September 2018.

And with the fact that the yellow metal is a hedge against inflation and a devaluation, investors resort to it in light of stimulus packages and massive liquidity pumping by central banks and governments around the world, which explains the secret of gold gains despite the rise of risky asset markets.

The 27-member European Union recently approved it A historic stimulus deal Through the so-called “recovery fund” worth 750 billion euros, while the United States is considering passing a new stimulus package.

And believed World Gold Council Investors ’use of gold as a hedging strategy in the investment portfolio has boosted its performance during the first half of this year, and is likely to support the stampede for safe havens for the remainder of this year.

According to the Bank of America’s weekly report, gold ETFs saw inflows of $ 3.8 billion in investment flows a week through July 22, to be the second largest weekly increase ever.

Essentially, gold has been experiencing an upward trend lately, driven by Concerns about the economic blow From the Coronavirus, amid growing signs that a prolonged epidemic is stalling economic recovery.

Is expected International Monetary Fund The global economy shrinks by 4.9 percent this year due to the fallout from the virus, which would be the biggest pace since the Great Depression.

And all of the above confirms Historically proven fact And that is that gold is considered as Good value store, Given the experience during the global financial crisis a decade ago.

And this year so far, it reached Gold gains About 25 percent or the equivalent of $ 381, with the fact that the price of the precious metal was $ 1523 an ounce at the end of 2019.

Gold performance within a year – (Source: Bloomberg Agency)

Gold saw gains for the seventh time in a row in the week ending July 24, the longest wave of weekly gains since 2011.

Indeed, a few dollars separate us from making Citigroup speculation that gold will hit a new record high within the next 6 to 9 months.

Fear “Citigroup“Gold prices benefit from concessional monetary policy, low real returns, and record inflows from ETFs.

The American bank believes that gold will exceed $ 2000 an ounce within 3 to 5 months, saying: “It is only a matter of time.”

Meanwhile, the bank raised “Goldman Sachs“The prospects for gold to rise to the level of $ 2000 an ounce within a year.

In the medium term, the price of gold is expected to reach $ 5,000 an ounce within the next 3 to 5 years due to inflationary concerns caused by the central banks’ printing of the funds, according to a hedge fund manager.Diego Barilla“.

The gold rally is likely to continue until 2021 amid increasing geopolitical risks in an environment of lower interest rates for a longer period, says Bloomberg Intelligence analyst Eli Ong.

In the same context, the group “UPS” raised its short-term forecasts for the price of an ounce of gold at $ 2,000 by the end of next September.


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