Why are Gold Prices Going Up?
As gold prices continue to rise, the metal solidifies its reputation as a reliable asset for investors worldwide. Influenced by factors such as interest rates, supply and demand dynamics, inflation, geopolitical tensions, and mining costs, the upward trajectory of gold prices shows its timeless appeal and historical importance. Amidst this rise, gold remains a straightforward choice for long-term investment, offering stability and financial security in uncertain times.
Value of Gold
Gold has remained valuable throughout history, surviving economic downturns and surpassing inflation rates. From its humble beginnings in 1970, where it traded for less than $300 per ounce in today's money, to its current average price of $2,114.25 per ounce as of April 2024, gold has shown to be a robust and resilient investment.
Notably, gold prices have historically surged during times of war and crisis as investors seek refuge in stable assets like gold. Additionally, the inverse relationship between gold prices and interest rates contributes to its appeal, especially when interest rates fall, making gold more attractive relative to income-paying assets like bonds.
Additionally, Exchange-traded funds (ETFs) backed by gold are essential to the gold market because they provide institutional and individual investors with an easy way to invest in gold. Even though gold ETFs had withdrawals at the beginning of 2024, they remain a substantial market component. Variations in investor preferences and economic conditions can be seen in the demand for gold exchange-traded funds (ETFs) across various geographies.
Global production
Interestingly, central banks have been actively increasing their gold reserves, viewing gold as a crucial asset for diversification and protection against economic uncertainties. With record-breaking net acquisitions in 2023 and ongoing activity in 2024, this trend has picked up pace in recent years.
Meanwhile, the production of gold has been rising globally over the past few years, with China being the world's biggest producer, producing an estimated 370 metric tons in 2023. Australia follows closely behind, producing about 310 metric tons in the same year. Russia and Canada each produced 310 tons, while the USA, Kazakhstan, Mexico, and Indonesia contributed 170 tons, 130 tons, 120 tons, and 110 tons, respectively.
In fact, global gold production hit 3,000 metric tons in 2023. Although output levels fluctuate, gold prices are predicted to grow gradually quarter over quarter, reaching a peak in the second half of 2025. In the face of instability in the global financial system, gold remains a strategic long-term investment option and a stable asset.