Gold prices soar again, approaching historical highs

Recently, with the increasing expectations of interest rate cuts by the Federal Reserve and the ongoing escalation of geopolitical conflicts, gold prices have continued to rise. On the 12th local time, London gold surged by 1.7%, closing at $2471.93 per ounce, an increase of over $40 in one day, once again approaching historical highs.

The increase in global geopolitical risks is one of the important factors driving up gold prices. On August 12, local time, a spokesperson for the U.S. National Security Council stated that Iran may launch a "significant" attack on Israel as early as this week. Many believe that an attack by Iran on Israel is imminent. Affected by this news, gold and oil prices rose sharply that day, with London gold closing up 1.68%; oil prices surged over 3% on Monday, marking five consecutive days of increases.

Additionally, last week, the rise in the U.S. unemployment rate in July raised concerns about a potential recession in the U.S. economy, leading to a widespread decline in financial assets. However, as the published data showed a decrease in initial jobless claims, which was lower than market expectations, it alleviated concerns about a "collapse" in the U.S. labor market, reigniting market optimism and allowing gold prices to rise.

Meanwhile, expectations for an imminent interest rate cut by the Federal Reserve have intensified. Lower interest rates mean reduced borrowing costs, increased economic stimulus, and a weaker dollar, prompting investors to seek safe-haven assets. Additionally, lower rates decrease the opportunity cost of holding non-yielding assets, enhancing the attractiveness of gold. Furthermore, expectations of rate cuts may trigger inflation concerns, further increasing gold's value as a hedge against inflation. Thus, this anticipated change in monetary policy provides solid support for the rise in gold prices.

From the perspective of gold demand, the latest report from the World Gold Council shows that in July 2024, global gold ETFs experienced the strongest month since April 2022, attracting $3.7 billion in funds, marking the third consecutive month of inflows, which is also one of the factors influencing the continuous strength of gold prices.

Moreover, the enthusiasm of global central banks for gold purchases has not waned. Although the latest data shows that China's central bank has not increased its gold reserves for the third consecutive month, many central banks in emerging market countries continue to increase their gold reserves steadily, ignoring the record highs in gold prices from a strategic asset allocation perspective. Notably, due to the ongoing escalation of the Russia-Ukraine conflict, some central banks that increased their gold holdings the most in the second quarter are from countries and regions surrounding the conflict.

This year, international gold prices have been on the rise. Since July, gold prices have surged to as high as $2483 per ounce, nearing the highest point since 1968 without inflation adjustment. According to the latest report from the World Gold Council, in the first half of 2024, international gold prices rose by about 10%, with gold increasing by 15% in dollar terms and achieving double-digit growth in other currencies.

Looking ahead, under the influence of geopolitical tensions, strong expectations for interest rate cuts by the Federal Reserve, weakening economic data, and central bank reserve diversification, gold is expected to continue to "shine brightly," with a breakthrough of historical highs potentially "just around the corner."

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