Gold Price (XAU/USD) hit a new record high when it surged past the $2700 mark in the early Asian trading section on Monday.
The surge in Gold made it a trending commodity within the Global crypto space as investors scurried to invest in anticipation of an impending bull run.
The uncertainty surrounding geopolitical tensions in the Middle East, together with the upcoming Presidential Elections in the US, resulted in investors and traders sourcing stable and safe havens for investment, with Gold, a historical store of value, fitting the bill.
The surge in gold prices is a direct result of ongoing geopolitical tensions in the Middle East, uncertainties around the US elections, and easing monetary policy expectations from the US Federal Reserve.
Alexander Zumpfe, a precious metal trader at Heraeus Metals Germany, commented on the uptick in Gold prices and gave his two cents on the factors behind the surge.
“With the conflict intensifying — particularly following Hezbollah’s announcement to escalate the war with Israel — investors are flocking to gold, a traditional safe-haven asset,” noted Alexander
“Adding to the momentum, concerns around the U.S. presidential election and anticipation of looser monetary policies have further fueled the rally,” Zumpfe added.
In addition to the above factors, the prospects of further Fed rate cuts continue to underpin the gold price. The US central bank lowered its interest rates for the first time in more than four years in the September FOMC meeting.
The rate cuts are not over and more are expected in November. According to the CME FedWatch Tool, there is 90% odds of an additional quarter-point rate cut in November.
Lower interest rates generally reduce the opportunity cost of holding non-yielding bullion, lifting the gold price.
Bearish Factors
After analyzing the factors behind the surge in gold price, we are now going to look at factors that can lead to a drop in the price of the precious metal.
The Chinese economy has witnessed a slowdown recently with its GDP expanding 4.6% YoY in Q3 versus 4.7% prior. This figure was below the government’s “around 5%” target for this year. Chinese economy numbers in the third quarter of this year Q3 was the slowest since last year.
The sluggish Chinese economy might lead to a drop in gold prices because China is the biggest consumer of Gold in the world. A drop in the economy will definitely lead to a drop in demand for the precious metal pushing down its price.
What to Know
- Gold has played a historical role in human history as a trusted store of value. The precious metal has been widely used as a store of value and medium of exchange. Apart from its physical appeal and status as a luxury item, Gold is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent and uncertain times.
- Gold can be traded in crypto with DACCs. Daccs are smart, programmable, and verified digital assets that run on blockchains that run through smart contracts.
