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The US appears almost certain to avoid a recession, US stock indexes are trading at record levels, and even risky investments like Bitcoin are at all-time highs, but gold teeth probably The world’s oldest investments continue to rise in value, often seen as a hedge against losses in other markets.
important facts
On Friday, gold traded at an all-time high of $2,195 an ounce, up 5% year-to-date and 19% for the 12-month period, and behind the US benchmark S&P 500. It moved in the same direction. % year-to-date return and 12-month return is 31%.
Given that the “safe haven” precious metal’s record rally is not consistent with past events that have driven gold’s all-time highs, such as the financial crisis of the late 2000s or COVID-19, gold The rush may come as a surprise to U.S. investors. 19 pandemic.
The main factor behind the rise in gold prices is that the situation is much less bright for many markets outside the US: 2.1% in the US projected This year’s economic growth rate is ahead of expectations for growth of less than 1% in other developed countries such as Germany, Japan and the UK, but stocks listed on major foreign exchanges have performed well below U.S. stocks. Hong Kong’s Hang Seng Index has fallen 18% year-on-year. Last year, Britain’s FTSE 100 fell 3%.
“Western investors are not driving gold’s rise” according to Metals Dairy CEO Ross Norman said there was a “tremendous” response from Chinese investors seeking to hedge potential economic instability in the world’s second-largest economy due to the impact of commercial real estate. He said demand turned into profit. crisis In China.
Within the United States, there are several other explanations for the rise in gold prices. That’s because some investors are betting on the possibility of worse-than-expected inflation, repositioning their portfolios in the wake of stock market spikes, and looking for ways to protect against geopolitical instability, which can pose problems such as: . In addition to wars between Israel and Hamas and Russia and Ukraine, the November presidential election is looming on investors’ minds.
What to watch out for
Future interest rate cuts will lower yields on U.S. Treasury bonds, making the returns of another typically safer asset class less attractive. Solita Marcelli, chief investment officer at UBS Global Wealth Management, said the past 50 years of big gold purchases by central banks around the world and Republican presidential candidate Donald Trump are increasing tensions between the U.S. and China. He said the potential is also a reason to remain bullish on gold going forward. Americas said in a note to clients on Friday.
big number
3.3 trillion dollars. According to JPMorgan Chase strategist Nikolaos Panigirtzoglou, this is the amount of gold held by investors. This equates to approximately 1.4% of global investment.
amazing facts
About half of January’s gold shipments went to Hong Kong and mainland China, UBS said.
Main background
Gold’s popularity as an investment has lasted for centuries history Maintaining value through inflation and periods of conflict around the world. U.S. investors’ confidence in precious metals reached its highest level last year since 2012, with a Gallup poll showing respondents are more confident investing in gold than stocks. Gold’s rise has coincided with a roughly flat US dollar, and the value of the US dollar typically rises when markets are in distress. The DXY, which tracks the dollar’s movement against a basket of major world currencies, is up 1% since the beginning of the year and down 2% from last year. According to FactSet data, gold’s value has increased 394% over the past 20 years, lagging the S&P 500’s 20-year return of 522%, but it still has no chance of returning profits in inorganic materials. Considering this, this is an amazing feat. As with stocks, so do shareholders.
