- Investing.com & Citi: Gold to $3000 in a year
- Finews First: Does the gold rush continue?
- Investopedia: 7 reasons to own gold
Investing.com & Citi: gold to $3000 in a year
Investing.com according to the article Cit analysts predict that the price of gold will rise to $3,000 by 2025 due to strong physical demand, central bank purchases, and macroeconomic factors. The article states that a turn to negative growth in the United States could increase the shift to safe-haven assets. Uncertainty surrounding the U.S. elections, peak interest rates, and public sector demand for gold also support this forecast, according to the writing.Finews First: Does the gold rush continue?
The price of gold has risen over 17 percent since the beginning of the year and is now at $2400, writes Finews First in its article. Recent movements in gold prices have been widely discussed, and according to the article, they have been historically broad and rapid. The rise in gold prices coincided with an increase in real interest rates, a strengthening dollar, and the continued growth of risk capital. The author notes that gold prices have previously correlated inversely with changes in U.S. real interest rates. According to the article, global demand for gold from central banks has doubled since 2022 and has continued to grow in the first quarter of this year. China, the world's largest gold producer, has increased its gold reserves in 2022-2023. Chinese consumers appear to have channeled some of their savings into gold purchases, and central bank gold reserves are growing. The risk of inflation returning is also favorable for gold, as it acts as a real asset that protects against excessive inflation.Investopedia: 7 reasons to own gold
Investopedia lists 7 reasons to own gold as follows, and at the same time, it is important to note that this is not necessarily in order of importance:1. Weakness of the US dollar
The US dollar is one of the world's most important reserve currencies, but when the value of the dollar falls relative to other currencies, people turn to gold as a safe haven, and thus the price of gold rises. The price of gold nearly tripled between 1998 and 2008, reaching the $1,000 mark per ounce at the beginning of 2008. The price nearly doubled between 2008 and 2012, exceeding $2,000.
2. Protection against inflation
Gold can act as a hedge against inflation because its price tends to rise as the cost of living increases. During years of high inflation, the price of gold can rise while stock markets crash. This is because when the purchasing power of fiat money weakens due to inflation, gold tends to rise along with everything else, as it is priced in that currency. Additionally, people may start buying gold when they believe their currency is losing value, as gold is seen as a good store of value.
3. Protection against deflation
Deflation is defined as a period when prices fall, business activity slows, and the economy is burdened by excessive debt. Deflation has not occurred globally since the Great Depression of the 1930s. Some parts of the world experienced slight deflation after the 2008 financial crisis. During the Great Depression, the relative purchasing power of gold sharply increased as other prices fell sharply. This was because people wanted to hoard cash, and the safest place to store cash at that time was gold and gold coins.
4. Geopolitical uncertainty
Gold retains its value not only during economic instability but also during geopolitical uncertainty. Gold is often referred to as a "crisis commodity": When global tensions rise, people flee to gold as a safe haven. During such times, gold often performs better than other investment assets. The price of gold often rises the most when confidence in governments is weak.
5. Supply constraints
Since the 1990s, a significant portion of the market's gold supply has come from gold bars sold by the world's central banks. This selling by central banks slowed significantly in 2008. At the same time, the production of new gold bars from mines has decreased since 2000.
6. Growing demand
The growing wealth of emerging market economies has previously increased the demand for gold. In many of these countries, gold is an essential part of the culture. In China, where gold bars are a traditional form of savings, the demand for gold is stable. India is the world's second-largest consumer of gold, and gold has many uses, such as jewelry. Therefore, India's wedding season in October is traditionally the time when global demand for gold is at its highest. Demand for gold is also increasing among investors. Many people are starting to view commodities, especially gold, as an investment.
7. Portfolio diversification
The key to diversification is finding investment assets that do not closely correlate with each other. Historically, gold has negatively correlated with stocks and other financial instruments. Recent history supports this, according to Investopedia.com. The article states that a properly diversified investor can reduce overall volatility and risk by combining gold in their portfolio with stocks and bonds:
- The late 1970s was a great time for gold, but a very bad time for stocks.
- The 1970s and 1980s were good for gold, but bad for stocks.
- The late 1990s and mid-2000s were good for stocks, but bad for gold.
