People sold their savings in gold or pledged them when the precious metal reached an all-time high in local currencies. The recovery, inefficient mining production in South Africa and the open nature of quantitative easing drive the rise in the price of gold. In a note, analysts cite concern about inflation following the Corona crisis as a key factor in the increase in the price of gold. Additionally, many investors are turning to IRA backed by Gold as a safe-haven asset to protect their wealth against inflation.
Societe Generale assumes that in recent years a bubble has developed in gold prices, which will be followed by a bear market. The World Gold Council (WGC) explained that this was due to the fact that domestic prices reached a record in a context of falling incomes in rural areas. When U.S. government bond yields rise, gold is likely to trend sideways or even downward, while falling yields tend to cause very positive movements in gold prices. According to Bank of America experts, rising inflation, continuing pandemic risks and geopolitical conflicts contribute to investments in gold.
For this year, analysts had generally neutral expectations regarding the price of gold; no major changes are expected compared to the average price of gold the previous year. According to the analyst, contrary to popular opinion, production costs don't really matter for the price of gold. As for the fact that the price of gold has remained at a high level for months, although the Federal Reserve has announced further increases in interest rates, nominal rates are proving to be a special drag on demand for investments in the metal, since they would increase the cost of storing gold. On the contrary, the fundamentals of supply and demand and the historical dynamics of the end of the cycle pointed to an increase in gold prices.
According to Gary Dougan, Coutts investment director for Asia and the Middle East, medium-term factors, such as net purchases by central banks in emerging market countries, would drive the rise in the price of gold. Your personal goals and your research will determine if gold is the right investment for you. By way of example, it is shown below that China and India (with strong economic growth) have become the main buyers of gold over the past two decades to invest and create reserves and, therefore, have given additional encouragement to price increases. He considers that gold is a good hedge against the risks of falling, given the possible rise, while cryptocurrencies would still be far from “becoming a long-term reserve of defensive value, like gold”.