The Undeniable Trend of the Gold Price Rally Since 2020
Factors Driving Gold Price Surge Since 2020
Gold (XAU/USD) has reached record highs, hitting an intraday peak of $2,454.20 per ounce this week. This surge has been driven by expectations of interest rate cuts, escalating geopolitical tensions, and pivotal economic indicators.
Interest Rate Cuts Fuel Gold's Rise
The recent upside momentum in gold is primarily attributed to the market's growing openness to interest rate cuts. Gold, being a non-interest-bearing asset, generally performs well when interest rates fall.
- This sentiment shift followed April's cooler-than-expected Consumer Price Index report, marking a notable inflection point for gold prices.
- With March's hot inflation prints behind, futures markets now predict two 25-basis point cuts this year, starting in September, according to CME Fedwatch tool.
Investor Risk Appetite on the Rise
Investor risk appetite has surged, as indicated by an S&P Global survey, showing a 28% rise in May compared to just 5% in April, reaching its highest level since late 2021.
Geopolitical Tensions Boost Demand
Geopolitical tensions, including the unexpected death of Iran’s president and recent incidents such as a drone attack on a Russian refinery, have increased demand for gold as a safe-haven asset.
Central banks stockpile gold since 2020. Countries like Turkey and China have significantly increased their gold holdings.
Recent economic data indicating a slowdown in the US recovery and potential easing of tight monetary policy have further boosted gold. Broader macroeconomic factors are also contributing to the positive outlook for gold and other precious metals.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.