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Gold has often been seen as a safe haven for investors during uncertain economic times, but it is currently enjoying a significant resurgence, making investors excited about its potential to reach the elusive $3,000 markIn 2024, after years of central bank support and economic turbulence linked to U.S. policies, gold's trajectory has begun to outpace other asset classes, capturing the attention of market analysts and investors alikeRemarkably, this year has marked a rekindling of interest in gold mining stocks, which are finally catching up after lagging behind gold price increases last year.
Although this bullish trend is promising, it's essential to review gold's long-term performance amid soaring pricesDespite gold futures hitting historical highs, it struggled to keep pace with the rapid growth exhibited by the American stock marketAdrian Ash, head of research at BullionVault, observes that historically, gold tends to shine brightest when other assets falter, particularly during bearish trades.
He points out the irony of the current situation, where both gold and equities are ascending near historical peaks simultaneously—something he has only observed on two occasions in his 25 years of market experienceThe first instance was just before the 2008 global financial crisis from 2005 to 2007, and the second was during the mid-2020 pandemic period when fiscal stimulus and zero-interest rates sparked fears of double-digit inflation.
So far this year, gold futures in New York have seen an increase of over 11%, while the VanEck Gold Miners ETF has skyrocketed by nearly 24%. In contrast, the S&P 500 index has climbed just over 3%, even setting a record high of 6,118.71 in JanuaryDespite this overall growth, the upward trend in the price of gold doesn't shine quite as brightly when viewed through the lens of performance since mid-2020, suggesting that excitement around gold may not be universally shared.
According to Dow Jones market data, the most active gold futures contract is up 47.8% since first crossing the $2,000 threshold on July 31, 2020. This compares starkly with the 18% decline experienced by the iShares U.S
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Treasury ETF during the same period, raising questions about the level of attention being given to gold's impressive climbJames Turk, founder of Goldmoney, echoes concerns about the relative silence surrounding gold's ascent, lamenting that few seem to notice or act on its rise.
The simultaneous surge of gold and the stock market indicates a delicate state in the overall economic landscapeDespite the bullish sentiments surrounding gold, approaching the psychological threshold of $3,000 per ounce may highlight underlying global economic troublesAsh articulates this, stating that if gold serves as a barometer of economic and political anxieties, the current rise could signal increasing global unrest.
An essential factor propelling gold prices has been the continuous buying spree by central banks, a trend that the World Gold Council indicates has persisted into 2024. Over the last fifteen years, central banks have been substantial buyers of gold, amassing a staggering 1,044.6 tons in 2024 aloneGeorge Milling-Stanley, chief gold strategist at State Street Global Advisors, suggests that much of the buying has originated from emerging markets, reflecting a strategy to bolster official reserves.
The volume of gold purchased has nearly doubled from 2021 to 2022, exceeding 1,000 tonsA significant catalyst for this increase appears to be the U.S. government's imposition of sanctions against Russia, leading many central banks to reconsider their reserve strategiesLooking ahead to 2024, Milling-Stanley believes gold demand is set to rise further, particularly in gold jewelry and investment needs within emerging marketsAdditionally, robust purchasing is also observable in Western Europe and North America, driven not only by macroeconomic factors but heightened geopolitical tensions as well.
From Turk's perspective, the current rally in gold prices can trace its origins back to the closure of Silicon Valley Bank in March 2023. This significant event awakened global investors to the fragility of the banking system under high-interest conditions and consequently triggered a surge in gold prices
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