Gold is one of the most sought-after commodities in the world, with a long history of being used as a store of value, a hedge against inflation, and a safe haven in times of uncertainty. But what factors are influencing the price of gold today, and what are the prospects for the future? In this article, we will look at some of the latest gold news and analysis from various sources.
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Gold Demand Hits Highest Level Since 2011
According to the World Gold Council, the annual gold demand (excluding OTC) in 2022 increased by 18% year-on-year, reaching 4,741 tonnes – the highest annual total since 20111. The report attributes this growth to strong central bank buying and robust retail investment, especially in China and India, where gold is seen as a cultural and religious symbol.
The fourth quarter of 2022 was particularly impressive, with a record 1,416 tonnes of gold demand, driven by seasonal factors such as Diwali, Christmas, and Chinese New Year. The report also notes that gold-backed exchange-traded funds (ETFs) saw inflows of 326 tonnes in 2022, adding to the existing stock of 3,908 tonnes.
Gold Price Falls Below $1,900 as Dollar and Yields Rise
Despite the high demand for gold, the price of the yellow metal has been under pressure lately, falling below $1,900 per ounce on Tuesday2. The main reason for this decline is the strength of the US dollar and the rise in Treasury yields, which make gold less attractive as an alternative asset.
The US dollar index, which measures the greenback against a basket of other currencies, hit a 10-month high on Monday3, as investors sought safety amid concerns over inflation, debt problems in China, and geopolitical tensions. The Federal Reserve also signaled last week that it will start tapering its bond-buying program soon and raise interest rates three times in 20234, which boosted the expectations for higher yields.
Gold tends to have an inverse relationship with the dollar and yields, as it does not offer any interest or dividends. Therefore, when these factors rise, gold becomes less appealing to investors who seek higher returns or lower risks.
Gold Outlook: Can Gold Recover from Its Recent Slump?
Despite the recent drop in gold prices, some analysts remain optimistic about the outlook for gold in the medium to long term. They cite several factors that could support gold prices in the future, such as:
- The persistence of inflationary pressures, which could erode the purchasing power of fiat currencies and increase the demand for gold as a hedge.
- The uncertainty over the pace and timing of the Fed’s monetary policy tightening, which could create volatility in the financial markets and boost the demand for gold as a safe haven.
- The geopolitical risks and tensions around the world, such as the COVID-19 pandemic, the US-China trade war, the Iran nuclear deal, and the North Korea missile tests, which could increase the demand for gold as a store of value.
- The supply constraints and environmental challenges facing the gold mining industry, which could limit the growth of gold production and create a supply-demand imbalance.
According to ANZ Bank5, gold is expected to trade near $2,000 per ounce by the end of 2023 and reach $2,200 per ounce in 2024. The bank believes that gold will benefit from a weaker dollar, lower real yields, and higher inflation expectations in the coming years.
Conclusion
Gold is a complex and dynamic commodity that is influenced by many factors. The latest gold news shows that gold demand is at its highest level since 2011, but gold prices are under pressure from a stronger dollar and higher yields. However, some analysts believe that gold has the potential to recover from its recent slump and reach new highs in the future. Therefore, investors who are interested in gold should keep an eye on the developments in the global economy and politics that could affect the price of gold.
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