Gold reaches unprecedented price highs

With a value of $2,530 per ounce, the gold price reached its all-time high yesterday. The precious metal is now in higher demand than ever before, thus meeting experts’ expectations. This is remarkable given the persistently high interest rates. After all, the return on the precious metal is solely based on its price increases, which have amounted to around 20 percent since the beginning of the year.

A success story that has lasted for 20 years

The triumph that gold began around 20 years ago has now reached its provisional peak. Back then, its value was just over $400 per ounce, and now gold is worth six times that amount.

When looking at the long-term price trend of gold, it reflects the major crises of the last few decades. Even in the lead-up to the subprime crisis, its value increased rapidly. This should have been a warning sign of the problems that would soon shake the global financial economy.

Crises fueled the rise

The steep rise continued in the face of banking crises and the Euro crisis. Further price increases occurred in 2015 and 2020, which have now broken through the $2,500 mark.

Apparently, the market still firmly believes in an interest rate cut by the U.S. Federal Reserve and is already pricing this in. However, a modest cut in interest rates alone would not be sufficient to explain these record prices.

Significant interest rate cuts ahead?

Investors are anticipating several rate cuts by the end of this year. If interest rates drop significantly, gold will automatically become more attractive to investors. In addition, the security situation in the Middle East is likely to have driven the price up further.

The buying frenzy has not only affected private individuals but also large investors and central banks. High demand is driving up prices, as gold production cannot easily be increased.

Additionally, emerging markets are buying gold to reduce their dependence on the dollar, at least to some extent. After all, the precious metal also serves as a means of diversification, similar to cryptocurrencies.