Growing fears of a recession in the US are driving the gold price towards a record high just before Easter. During the course of the week, there was not much missing from the mark of $2,075 per troy ounce from the summer of 2020. At times, the precious metal was traded on the London Stock Exchange for $2,031. This makes the precious metal more expensive than it has been for more than a year.
A key driver for the increasing demand for gold is the price development on the foreign exchange market. The US dollar has lost value due to the recent disappointing US economic data and the recent turbulence in the banking sector following the bankruptcy of several regional banks in the US. As a result, gold traded in dollars is becoming cheaper on the world market, which increases demand.
Concerns about recession in the US
In March, the turbulence in the banking sector had startled investors and at times pushed the price for a troy ounce (31.1 grams) of the precious metal above the 2000 US dollar mark. A possible slide of the US economy into recession is now regarded as an important price driver.
Recently, weak data on sentiment in services increased concerns about a contraction in the world’s largest economy. This fueled speculation that the US Federal Reserve would stop raising interest rates. Should interest rates stop rising or even fall again, this could increase demand for investments in gold.
Central banks are fighting inflation
According to experts, the development of inflation in leading industrialized countries will play a major role in the further development of the gold price. Central banks have been raising interest rates for many months in the fight against high inflation. The result is rising yields for fixed-income securities such as government bonds. Since investments in gold do not yield any interest, demand had suffered in the past year and the price of gold had fallen to almost $1,600 last fall.
Alexander Zumpfe, precious metals dealer at Heraeus, expects the price of gold to remain stable below the $2,050 mark in the coming months. Should this be cracked, however, he believes the price of gold could quickly rise towards a record high. Commerzbank commodities expert Thu Lan Nguyen said: “We have raised our year-end forecast from $1,950 to $2,000 a troy ounce.”
