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Gold investors have had a wild run as of late.
In early December 2023, gold hit a new all-time high: Several, actually!
This article explains the new gold all-time high, why it happened, why it matters, and what might be next for gold spot prices.
Update 3/11/24: The gold rally is back, with gold again exceeding all-time highs. Gold spiked as high as $2195 per ounce in intraday trading, while Bitcoin surged above $72,000.
On Monday, December 4th, 2023, gold notched a new all-time high with an intraday trading value of $2,135.39 per ounce. The previous all-time-high was set in August 2020 at $2,072 per ounce.
Keep in mind that gold prices change constantly. That same Monday, prices slipped nearly 5% to trade as low as $2,023 per ounce. Plenty of volatility followed as traders digested market news from the week.
Other alternative assets rose, as well, with Bitcoin surging above $44k.
The value of gold is set by activity on the global spot markets, where traders, investors, and banks transact in gold spot contracts (which represent real gold). Gold trades similar to stocks on the stock market, meaning that supply and demand (the buying and selling activity) influences the price of gold.
Put simply, when there’s strong demand (more buyers than sellers), gold prices rise. Central banks have been some of the largest buyers of gold in recent months, but demand in general is quite strong.
The recent rally in gold prices, and the subsequent new gold all-time high, was largely driven by the expectation that the Federal Reserve will start cutting interest rates in 2024. We talked more about the upcoming rate cuts (and their effect on gold and silver prices) on the blog.
Generally speaking, when interest rates are higher, bonds and other income-producing assets are more attractive to investors. This can dry up demand for gold, as investors flock instead to assets that produce a cash yield.
So, investors are betting that gold prices will rise in response to Fed rate cuts. And perhaps, as often happens, they’re getting a little ahead of themselves!
The Fed has been aggressively raising interest rates for the past 2 years in an attempt to quell rising inflation. Surprisingly, gold prices have held up remarkably well during this time, perhaps due to gold’s role as a “safe haven” asset in times of economic uncertainty.
So, we have a combination of already-high gold prices, mixed with news that signals the Fed may be cutting rates in the near future (which is a positive price driver for gold spot). On top of this, the strength of the US dollar has slipped in recent months, adding fuel to the flames of this gold rally.
The short answer is that nobody really knows. It’s notoriously difficult to predict the future value of any asset.
In the short-term, gold prices are likely overbought. This rally has largely been driven by expectations of future rate cuts, which may or may not happen. Even if the Fed does cut rates, it likely won’t be for several more months.
In the long term, gold has both positive and negative catalysts to consider.
Some analysts are feeling positive about the future of gold.
“I think gold is in the early days of a bull market breaking out to new highs,” Mike McGlone, Bloomberg Intelligence senior macro strategist, told Yahoo Finance.
Michele Schneider, partner and director of trading education and research at MarketGauge.com, told Yahoo Finance that she believes gold could hit $3,000 per ounce, noting that the precious metal has held up “in the face of a stable dollar and higher rates.”
Rob Haworth, senior investment strategy director at US Bank Asset Management Group, is less optimistic. “Lower interest rates, due to investor hopes for Fed rate cuts in 2024, and a weaker US dollar provided some support over the last eight weeks,” Haworth explained, noting that “A key question for bullish gold investors is whether these trends can be sustained. A still-growing US economy and few signs the Fed is close to considering interest rate cuts are likely to temper near-term enthusiasm for gold.”
While these day-to-day movements are exciting, most investors will be best served by investing for the long term. And that often means ignoring the short-term movements of asset prices and focusing instead on building wealth and diversifying your investment portfolio.
Buying gold, stocks and other assets regularly is a great way to build wealth in the long term. And be sure to protect your bullion with secure storage, or look into using a precious metals IRA program to invest in gold for retirement. Learn more about the Precious Metals IRA from Bellevue Rare Coins here.
And for all your gold and silver needs, we hope that you’ll trust Bellevue Rare Coins for both buying and selling valuables. With convenient Seattle-area locations to serve you, Bellevue Rare Coins is the best place to buy investment-grade bullion. Get in touch today!
