The troy ounce of gold, the ultimate safe haven, recorded a rise of 1.4% on Friday afternoon, reaching a new historic high of 2,625 dollars, in a context marked by the drop in interest rates decided by the Federal Reserve (Fed) of the United States, which achieved this last Wednesday.
Gold continues unprecedented heights after breaking records over the past two weeks on the prospect that the Fed would make the rate cut move; in fact, on Wednesday afternoon, with the announcement of the cut, it briefly touched $2,600 for the first time.
Similarly, gold has also found another bullish support these days. growing tensions between Israel and Lebanon. So far this year, gold has accumulated revaluation of almost 27%.
The current bullish trend in the precious metal is part of the current cycle of monetary flexibility, as the European Central Bank (ECB) cut rates again last week and the Fed followed suit last Wednesday with a half-percentage point cut (the market was wondering if the reduction would be limited to a quarter point), leaving benchmark rates in the 4.75-5% range.
IG market analyst Sergio Ávila already announced last week that the historical gold prices were explained by dollar weakness and falling bond yieldsin addition to the well-known premise of Fed cuts.
“This global economic context, with signs of weakness in major economies and the possibility of monetary easing, have made gold a consolidation as a “an investor’s paradise”he added.
It should be noted that gold and the dollar maintain, according to classical theory, a inverse correlationbecause when the “price of money” (interest rate) falls, more dollars are needed to buy bullion, while tight monetary policy puts pressure on the price of the metal.
In line with this last point, Bank of America (BofA) predicted at the end of last June that the price of a troy ounce of gold would rise to $3,000 within 12 to 18 months due to the confluence of several factors, among which the demand for precious metal from central banks stands out.
Up 45% from October 2023
The price of gold has strongly resurfaced due to the return to the forefront of the Palestinian-Israeli conflict, while since October 7th – the day of the Attack by the Islamist militia Hamas on Israeli territory– The metal accumulates a revaluation of 43%.
Thus, driven by geopolitical risks and massive purchases by central banks, gold reached a new level for its historical records above $2,100 in early December and continued to break new highs. until reaching $2,450 last May.
Prior to this bull run last fall, the last time gold traded above $2,000 was in May 2023 due to market stress. The Ukrainian conflict and the blows dealt by the crisis of the American regional bank, as well as the bankruptcy of Credit Suisse last March, so that its value reached a value of 2,063 dollars at the beginning of May.
However, the previous all-time high for gold – before the end of 2023 – occurred on March 7, 2022, when the ounce reached $2,075starting two weeks before the Russian invasion of Ukraine. At the same time, it was also around these levels in August 2020, after the outbreak of the pandemic.
