This year, all-time highs for gold have been driven predominantly by mounting tensions and conflicts in the Middle East and Ukraine.
With the launch of around 200 ballistic missiles into Israel yesterday, it appears that the much-feared escalation into a regional war is inevitable.
Israel has committed to a further retaliatory strike at both oil refineries and nuclear sites in Iran.
Gold will hit and surpass $3,000 the very second that Israel launches its missiles, and I expect – backed by the US – it will respond within the next few days.
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Aside from the spectre of a major war, factors such as economies on the edge of recession, continued robust purchases by central banks, and de-dollarisation (the rise of BRICS) are coming into play.
Additionally, some investors have avoided selling gold, which has further limited supply and added upward pressure on prices. With inflation easing but still present and the potential for more rate cuts, the outlook for gold remains positive for the remainder of 2024.
I believe gold will continue to perform as it has throughout history, hitting a new all-time high, pulling back for a while and then topping the previous ATH. The problems in the Middle East will continue to drive gold as any interruption in the production and transportation of oil will cause the return of inflation like a sledgehammer, and gold performs at its peak during times of high inflation.
What about other assets in the current economic and political climate?
Gold is traditionally viewed as a safe-haven asset, especially during times of economic uncertainty. This characteristic remains strong compared to other precious metals or alternative investments in the current market.
While silver, platinum, and palladium also have investment appeal, their performance is tied to industrial demand, which can lead to greater price volatility. Gold, on the other hand, is more driven by the factors mentioned. In the present climate of high inflation coupled with uncertainty around interest rates, gold has retained its allure as a store of value.
Alternative investments like stocks, real estate, and cryptocurrencies, in contrast, face greater volatility and potential corrections. Cryptocurrencies such as Bitcoin, sometimes described as ‘digital gold,’ have been particularly susceptible to extreme price swings.
Gold shines as a more stable option for risk-averse investors. Overall, its ability to preserve wealth in uncertain economic conditions continues to make it a strong competitor against other precious metals and more volatile alternative assets.
