Gold prices are influenced by geopolitical tensions and domestic political events, highlighting the interconnectedness of global markets.
The rising U.S. national debt and budget deficits present a significant risk to the economy, potentially undermining confidence in the dollar as the world's reserve currency.
Central banks' increasing appetite for gold suggests a broader shift in investment strategies, moving away from traditional assets like U.S. Treasury bonds.
Gold prices are likely to continue rising as geopolitical tensions persist and the U.S. election approaches.
The U.S. national debt may reach unsustainable levels, prompting further shifts in investor confidence away from the dollar and towards gold.
Central banks are expected to maintain or increase their gold purchases, potentially leading to a long-term rise in gold's share of global reserves.
On October 21, 2024, gold prices surged by 0.6%, surpassing the $2,755 mark per troy ounce for the first time, according to the New York Commodity Exchange Comex. This rise marks the fifth consecutive day of record highs, driven by increasing tensions in the Middle East and the approaching U.S. presidential elections, as noted by Oleg Kalmanovich, chief analyst at Neomarkets.
Kalmanovich explained that gold typically appreciates during times of economic or political uncertainty, making it a preferred asset for investors seeking stability. With Israel's military preparations against Iran and concerns surrounding the potential outcomes of the U.S. elections, demand for gold has intensified. Financial analyst Vladislav Antonov echoed this sentiment, linking the political climate to a broader atmosphere of uncertainty that drives investors towards protective assets like gold.
Further compounding the situation is the U.S. Treasury's budget report, which revealed a staggering deficit of over $1.83 trillion for the 2024 fiscal year. This deficit, only surpassed during the pandemic, highlights the increasing burden of national debt, which currently exceeds $35.7 trillion. The Congressional Budget Office predicts this figure could rise to $56.8 trillion in the next decade, raising alarms about the sustainability of U.S. fiscal policy and the potential for a debt spiral.
The growing national debt and budget deficits have led to a decline in confidence in U.S. Treasury bonds as a safe investment. Bank of America economists warn that as the national debt continues to grow, the risk associated with these securities increases, further solidifying gold's status as the 'last safe haven.'
Investor sentiment is also influenced by global central banks, which have been significantly increasing their gold reserves. The World Gold Council reported that central banks purchased 1,082 tons of gold in 2022, a record high, and continued their buying spree into 2024. Countries like India, China, and Turkey are diversifying their reserves with gold, contributing to the rising demand.
As the U.S. faces economic uncertainty, with inflation concerns and a fluctuating dollar, analysts predict that gold will remain an attractive asset for both individual investors and central banks. The trend indicates a potential shift in the global monetary landscape, with gold's share in reserves expected to increase at the expense of the dollar.
