On September 5, the price of gold exceeded the threshold of $3,570 per ounce for the first time in history. This is a big approach, and it is noted that the precious metal has increased by approximately 30% since the beginning of the year, reuters.com reports.
Why is gold rising so high? The main factors are concentrated at one point, strengthening demand in the market. Below we will cover these reasons in more detail.
The first reason is the expectation that the US Central Bank might lower interest rates. Interestingly, when rates fall, people prefer to switch to gold instead of keeping money in deposits. Thus, savers and institutional investors also begin to choose assets as a means of protection.
The second reason is the weakening of the dollar. Because gold is valued in dollars, when the "green box" capacity decreases, gold appears relatively cheaper for buyers who settle in other currencies. This creates additional demand in the international market.
The third reason is the increase in risks in the world. When military conflicts, trade unrest, and political tensions escalate, investors avoid risks and seek "shelter" assets. Gold is perceived as such a reliable asset and becomes even more relevant as a reserve tool.
The fourth reason is the purchases of central banks. Many countries are strengthening the practice of diversification in their reserves, reducing the share of the dollar and increasing the share of gold. Such a strategic demand supports the price in the market.
In conclusion, because these factors manifested simultaneously, the price reached a record peak. If interest rates fall, geopolitical risks persist, and central banks continue to buy, gold is likely to become more expensive again. Otherwise - if inflation decreases and the dollar strengthens - prices may gradually recede.
As Reuters wrote, on September 2, gold traded over $3,500 for the first time in its history - around 3,529 deals were recorded, after which it reached a point of 3,578.50. On September 5th, according to tradingeconomics.com, the price was around $3,551.46, marking one of the highest peaks of the year.
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