Why Gold Prices are increasing across the Globe?:

Why Gold Prices are increasing across the Globe? As of today, i.e., 18th April Gold Prices have crossed the mark of 75000. Gold prices have almost gone up by 16% in the last 3 months. If this trend continues, it is anticipated that it will soon cross the mark of 100,000 also. Now let us try to understand, why gold prices are increasing Across the globe.

 

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Massive Investment of China in Gold

In 2023, the People's Bank of China (PBoC) purchased a record 735 tonnes of gold, of which around two-thirds were acquired in secret. Furthermore, the net imports into the private sector were 1,411 tons in 2023 and a staggering 228 tonnes in January 2024 alone.

War Like Situation

First, it was Russia and Ukraine, then Israel and Palestine, and Now Iran has also come into the picture. When there is a war, gold prices usually rise for several reasons: Gold is frequently seen as a safe haven asset, which means that it is a wise choice to invest in during unstable and uncertain times. Investors may swarm to gold in times of conflict in order to save their riches.

Fall in US Dollar Index

On international markets, gold is valued in US dollars. Therefore, the price of gold tends to decline in US dollars when the US dollar gains strength relative to other currencies. On the other hand, gold prices usually rise in response to a decline in the US dollar. This relationship exists because gold costs more to holders of other currencies when the dollar is stronger, which reduces demand and drives up prices. Conversely, when the dollar is weaker, gold becomes relatively cheaper and more in demand, which drives up prices.

Interest Cut by Federal Reserve Bank

It is anticipated that in June of this year, the Federal Reserve will make its first interest rate reduction announcement. Interest rates and gold usually have an inverse connection. The opportunity cost of owning gold, which has no income or dividends, drops when interest rates are low, which boosts demand and drives up prices. On the other hand, increased interest rates may make gold less appealing as an investment, which would result in a drop in price. Now that lower interest rates are anticipated in both the US and India, gold prices could increase further.