Gold will create a big surprise at the end of the year
Gold prices have risen to a new all-time high, hitting $2,440 in the morning and $2,450 in the afternoon Vietnam time due to shelter demand as geopolitical tensions increase. According to Reuters, the reason is that Iranian President, Ebrahim Raisi, and other high-ranking Iranian politicians were killed in a helicopter crash in the North of the country over the weekend. This increases instability in an already tense region because of the Israel-Hamas conflict.
Factors supporting gold prices
Geopolitical tensions escalate: Russia opens a second front in Kharkiv and close ties between Russian President Putin and Chinese President Xi Jinping during Putin's recent visit to Beijing add to concerns about the formation of a new order, seriously affecting world peace and free trade.
Demand from BRICS countries and central banks in emerging economies: According to the IMF, gold demand from BRICS countries and central banks in emerging economies has increased significantly in recent years as a preventive measure against Western sanctions. This trend is expected to continue to increase in light of recent instability in the world.
Expectations for a Fed rate cut: Gold also benefits from the general expectation that the Fed will maintain interest rates at their current high levels for longer. This is beneficial for gold because it will reduce the opportunity cost of holding this non-interest-bearing asset compared to USD or government bonds.
April CPI and Retail Sales data: This change in outlook comes from April CPI and Retail Sales data released last week. Although Fed members are still avoiding revealing when the Fed might cut interest rates, the market still predicts a 65% chance that the Fed will cut the first time in September, based on the CME FedWatch tool.
Currently, Fed Chairman Jefferson will give his final speech of this Monday. However, there probably won't be too many fluctuations because the previous three speeches seem to partly reflect the Fed's current hawkish stance and gold prices have also dropped sharply from the historic peak of 2,450 USD.
Factors supporting gold prices
Geopolitical tensions escalate: Russia opens a second front in Kharkiv and close ties between Russian President Putin and Chinese President Xi Jinping during Putin's recent visit to Beijing add to concerns about the formation of a new order, seriously affecting world peace and free trade.
Demand from BRICS countries and central banks in emerging economies: According to the IMF, gold demand from BRICS countries and central banks in emerging economies has increased significantly in recent years as a preventive measure against Western sanctions. This trend is expected to continue to increase in light of recent instability in the world.
Expectations for a Fed rate cut: Gold also benefits from the general expectation that the Fed will maintain interest rates at their current high levels for longer. This is beneficial for gold because it will reduce the opportunity cost of holding this non-interest-bearing asset compared to USD or government bonds.
April CPI and Retail Sales data: This change in outlook comes from April CPI and Retail Sales data released last week. Although Fed members are still avoiding revealing when the Fed might cut interest rates, the market still predicts a 65% chance that the Fed will cut the first time in September, based on the CME FedWatch tool.
Currently, Fed Chairman Jefferson will give his final speech of this Monday. However, there probably won't be too many fluctuations because the previous three speeches seem to partly reflect the Fed's current hawkish stance and gold prices have also dropped sharply from the historic peak of 2,450 USD.
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