The price of gold has seen one of the most pronounced increases, recently reaching an all-time high
The price of gold rose in one month from $1,991 to almost $2,400. This is one of the most pronounced increases in the price of the yellow metal.
If we convert today’s value of gold into real purchasing power, the last record was recorded 4 years ago, when the ounce had reached the price of 2,467 dollars.
However, the absolute record was set in the 80s, when an ounce cost more than 2,600 dollars. These are values adjusted for inflation and related to purchasing power.
Now, the value of gold has a significant potential for growth, even exceeding the $2,600 threshold is expected.
Moreover, analysis indicates that major central banks are buying gold at a rapid pace to protect their financial reserves from inflation.
In fact, 2022 and 2023 saw the most voluminous purchases in recent decades, with over 1,000 tons of gold bought by central banks.
What influences the price of gold
The basis is the policy of the Federal Reserve, i.e. the central bank of the United States of America, which, following the inflationary wave, ended up raising interest rates to over 5%.
At the same time, the yield on ten-year US bonds is over 4.5% today, compared to 1-2% in 2021. In this case, the vicious circle intervenes, because the Fed cannot afford to cut interest rates, due to inflation high, but, on the other hand, it can no longer maintain them at the current values, because it risks an excessive indebtedness of the USA.
Furthermore, low interest rates would mean negative real interest rates, and major buyers of US Treasuries would no longer be willing to accept negative yields.
China, which is the world’s second-largest buyer of US Treasuries and holds nearly $800 billion worth of US Treasuries, has for some years begun shedding massive amounts of US bonds.
