Gold reaches highest price since August 2013. Tensions between the United States and Iran and the Federal Reserve’s intention to cut interest rates in the coming months are the main causes of the massive rise in the price of gold that last Friday morning touched $ 45,209,66 per kg.
The first cause of the increase in the price of gold is the extremely high climate of tension – a true pre-war climate – which arose between the United States and Iran after an American drone that roamed undisturbed, according to Tehran, in an unauthorized territory near the Strait of Hormuz was shot down by the Iranians themselves four days ago (Thursday, 20 June 2019). President Donald Trump has ordered an immediate attack on Iran, an attack that was subsequently canceled following a rethink. Despite the unexpected change of direction by the White House, gold continued to be traded around $ 1395 / ounce even in the following hours. Yesterday (Sunday, June 23, 2019) the United States announced that it had successfully completed a cyber attack against Iran, disabling the missile’s information systems.
The atmosphere therefore remains tense and gold should benefit further in the coming days.
Until one month ago, investors in US government bonds didn’t expect bad news from the Federal Reserve at least until the beginning of 2020. However, on June 3 the bitter surprise came. In fact, Federal Reserve Governor Jerome Powell has announced a possible cut in interest rates following the stalled US economy. The maneuver is in a certain sense inevitable, but US bond holders didn’t take this news very well and immediately created a climate of distrust and anger. With further cuts in interest rates, investors will get a negative return.
The announcement is strongly linked to the trend of gold, given that the yellow metal is quoted in dollars. When the dollar depreciates and loses confidence from investors, the purchase of gold becomes much more convenient for those who buy it in other currencies due to exchange rate factors, hence the global demand for gold raises more and more, thus raising the price accordingly.
How far the gold will go
According to FX Empire analyst Christopher Lewis, the rise of gold is not yet over, so much so that a peak of $ 1,500 / ounce can be expected in just a few months.
Citigroup analysts are also optimistic, predicting an increase in the price of the yellow metal from $ 1400 / ounce (current) to $ 1450 / ounce within three months.
According to Citi, in a complacent context like the current one, gold could exceed $ 1500 / ounce by the end of 2019 and touch $ 1600 / ounce within the next 12 months.
Investors around the world are already running for cover.
“The beauty of gold is, it loves bad news” – John Updike