New All-Time High

A new all-time high was recorded at $2484.24 per troy ounce compared with just above $2000 per ounce at the end of 2023. Gold prices have rallied by almost 20% in 2024 amid economic uncertainty.* One of the biggest increases was recorded in March and April when it became clear that interest rates would not be lowered in the summer of 2024 due to persistently high inflation.

Source: Yahoo Finance

Increasing Demand from Central Banks

Gold prices have rallied due to two main factors. The first is incredibly high demand, especially from central banks. With a long-term yearly average of 500 tons bought by central banks, 2022 and 2023 saw purchases exceeding 1,000 tons. Additionally, in Q1 2024 alone, their demand totaled 289.72 tons, marking the 17th consecutive monthly increase.

Countries leading the charge in gold purchases include Turkey and China, followed by India, Kazakhstan, and the Czech Republic. Their primary objective is to hedge against global instability and safeguard their economies. Finding a safe harbor for their money is also a reason to buy gold for many retail investors.

Fed Suggests Rate Cuts in September

As inflation continues to decline, the probability of rate cuts in major economies is rising. This surge in gold was also triggered by a speech from US Federal Reserve Chair Jerome Powell on Monday. Powell highlighted that inflation had come below expectations for June, indicating that inflation is moving closer to the central bank's target. He further mentioned that it wouldn’t necessarily need to reach the 2% mark before the Fed considers cutting rates.

This is a bullish signal for gold, as lower interest rates reduce the opportunity cost of holding non-yield-bearing assets. This effect is amplified as lowering interest rates will likely cause the US dollar to decline, making gold cheaper to buy.

How to Profit from Rising Gold Prices?

Investors have several options to profit from rising gold prices besides buying physical gold. They can invest in ETFs dedicated to precious metals, or strictly gold. Other options include purchasing stocks of companies that mine, process, or sell gold. Additionally, trading gold via CFDs (Contracts for Difference) is another viable option.

* Past performance is no guarantee of future results.