Although investors questioned the global value of gold last September, the situation in the financial market has dramatically changed, since gold prices have risen significantly, according to the latest economic reports by Gulf Brokers.
Since the beginning of January 2019, the gold price increased by 3.5%, while in the last eight months, it increased by 7.6%, according to the report of an economic analyst, Mahmoud Abu Hedima, who added that the gold value rose to its highest level in eight months at the beginning of February, exceeding $1,327 per ounce.
Experts attributed this hike to several factors, including the desire of investors to buy gold at favourable prices due to the volatility of the stock market, which saw multiple declines in the fall, as well as the decline in the value of some local currencies, therefore, gold has become a safe haven that investors always resort to when they feel uncertain about financial markets.
According to the report, investment in the precious metals raised tensions in the market, due to a slowdown in the global economic growth and concerns regarding the growing inflation, which drove the gold prices to hike. Central banks also made huge investments in gold last year, partially, for fears of a potential recession in key central banks around the world.
For example, Russia, Hungary, and Turkey raised their gold reserves by 651.5 tonnes, making an increase of 74% year after year. Kazakhstan was also a major investor in gold in 2018, with its gold reserves growing by 50.6 tonnes.
In general, central banks last year purchased the largest amount of gold since the end of gold standard. According to experts estimates, they can buy up to 600 tonnes this year.
This policy can protect central banks from potential economic and political risks, and can also be a way to reduce dependence on the value of the euro.
The global demand for commodities, including purchasing gold in (coins and alloys) – including central banks – rose last year by 4% to reach 4345.1 tonnes, according to a report of the World Gold Council.
According to Gulf Brokers, the current political and economic situation, as well as Britain’s exit from the EU will cause a growth in gold prices, as central banks fear the risk of a no-deal Brexit, not to mention Italy’s technical recession.
Obviously, investors prefer to diversify the sources of risks by placing some of their capital in gold’s safe haven.
Stock markets have also grown in the recent days, which means that gold prices have slightly dropped now at $1,308 per ounce. A similar correction has been witnessed over the past few months, however, all factors play in favour of gold on the long term.
