Latvia also made good money: at the end of 2022, the gold reserves of the Republic of Latvia, according to the central bank, amounted to 213,836 troy ounces (about 7 tons). This gold is not physically available in Latvia – the bars are stored in the Bank of England. According to preliminary estimates, over the past year Latvia’s gold reserves have risen in price by several tens of millions of euros.
Finger to the sky
Moreover, few people expected this, and most forecasts did not come true. For example, the American investment giant JPMorgan predicted that in the second quarter of 2024 the price of gold would rise only to 1.98 thousand dollars and only by the end of this year expected it to break the 2 thousand mark. At the same time, its analysts expected it to reach 2.3 thousand dollars, which the market surpassed a couple of weeks ago, only by the third quarter of 2025.
The World Bank forecast gold prices at $1.9 thousand for 2024 and $1.7 thousand for 2025.
Why is it getting more expensive?
The rise in gold prices is explained by the coincidence of four key reasons:
* Exacerbation of geopolitical and military risks in the world. We are talking not only about the war in Ukraine and the conflict in the Gaza Strip, but also about the risks in relations between China and Taiwan, as well as South and North Korea. During such periods, many investors invest in so-called safe haven currencies, which include gold.
* Political turbulence in the United States ahead of and after the presidential elections in November. If Donald Trump comes to power, non-trivial political and economic decisions are expected from the United States. What could affect the dollar?
* The upcoming reduction in interest rates by the US Federal Reserve, which were kept at 5.25–5.5% in March. However, Fed Chairman Jerome Powell speaks of his intention to lower them three times in 2024 – by 0.75% per annum cumulatively. And some investment groups like Goldman Sachs Group do not rule out even four reductions. Everyone is just guessing when exactly it will start: some predict the start of this campaign in May, and others in June.
But everyone understands that following a decrease in rates, there will be a reduction in yields on dollar securities, and primarily on Treasury (US government bonds) – where the yield on 10-year securities is now at 4.39%. As rates drop, investors will leave dollar assets and move to more profitable ones, which now includes gold.
* Growing demand for gold from central banks in different countries who are trying to diversify their portfolios. The World Gold Council gave an interesting comparison: in the period from 2016 to 2019, the world’s central banks bought 509 tons of the precious metal, and in 2022-2023 alone – already 1060 tons, and continue their acquisitions in 2024. In January of this year, the central banks of Turkey (purchased 12 tons of gold), China (10 tons) and India (9 tons) were the most active in purchasing.
The demand of central banks is explained by the same political turbulence in the world.
The largest non-Western countries are seeking to reduce the share of Western currencies (dollar and euro) in their reserves in case of a possible conflict with Western countries. There is also generally growing uncertainty about the future of the current global financial system, which also leads to increased demand for gold.
What’s next
Against the backdrop of all these factors, experts expect a new rise in gold prices in 2024. On average up to 2.3–2.6 thousand US dollars per troy ounce.
At the same time, there are those who expect a more significant rise in price, for example, Rosenberg Research researchers predict a price increase to 3 thousand dollars.
How much does a million weigh?
At today’s prices, 1 million US dollars is 13.2 kg of gold.
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2024-04-27 17:14:40