Gold has recorded gains of more than 5% since the beginning of the year so far and an impressive rise of 19% in the past 12 months (Shutterstock)

In the midst of the strong US economic indicators that were issued recently and with the rise of the stock market, gold - the traditional safe haven - reached its highest level ever at $2,195 per ounce, before it caught its breath a little, recording gains of more than 5% since the beginning of the year until now. An impressive increase of approximately 19% in the past 12 months.

What are the driving forces behind gold's unexpected rise, in Forbes magazine's words?

The puzzling gold fever

“Gold’s rise to record levels stands in stark contrast to previous instances when the yellow metal rose during the financial crisis in the late 2000s or at the beginning of the Covid-19 pandemic,” the Forbes report says.

The report adds that while the US economy is expected to grow by 2.1% this year, outpacing other advanced economies such as Germany, Japan and the United Kingdom, the real driver behind gold's rise appears to be the less optimistic expectations of many non-US markets.

Foreign stock exchanges, especially in Hong Kong and the United Kingdom, witnessed poor performance, as the Hang Seng Index in Hong Kong fell by 18% over the past year, and the British FTSE 100 index fell by 3%.

The real driver behind gold's rise is the less optimistic outlook for many non-US markets (Shutterstock)

Forbes quotes Metals Daily CEO Ross Norman as saying that gold's rise is fueled by "tremendous" demand from Chinese investors seeking to hedge against potential economic instability, especially in light of the commercial real estate crisis in China.

It is noteworthy that gold caught its breath - today, Monday - after a series of record highs, and the yellow metal stabilized in spot transactions at $2,177.24 per ounce in morning trading, while American gold futures contracts recorded $2,183.90.

Other factors boost gold

Several factors contribute to the rise in gold, including:

  • Some investors seek protection from the risks of higher-than-expected inflation.

  • Other investors adjust their portfolios in the wake of a stock market rise.

  • Geopolitical concerns, including Israel's war on Gaza, as well as Russia and Ukraine, along with the impending presidential elections last November, add to the list of uncertainties driving investors to turn to gold.

  • According to Forbes, analysts are closely monitoring potential interest rate cuts, which may affect US government bond yields, making other safe-haven assets such as gold more attractive.

  • Increased record gold purchases by central banks globally.

  • The possibility of escalating tensions between the US and China if Donald Trump becomes the Republican presidential nominee are being cited as reasons for the curve to remain bullish on gold.

The global appeal of gold

Surprisingly, about half of gold shipments last January were destined for Hong Kong and mainland China, indicating a huge appetite for gold in Asian markets and confirming its global appeal.

Half of gold shipments in January were destined for Hong Kong and mainland China (Al Jazeera)

The attractiveness of the precious metal

Gold's popularity as an investment is due to its centuries-old history of retaining its value during periods of inflation and global conflict.

Last year witnessed American investors expressing their highest levels of confidence in gold since 2012, as a poll conducted by Gallup indicated greater confidence in gold investments compared to stocks.

Gold's rise is consistent with the relative stability of the US dollar, which usually gains value during crises and difficult market conditions.

The Forbes report says that although its value has increased by 394% over the past 20 years, lagging the S&P 500's return of 522%, gold's resilience remains noteworthy, considering that it lacks the profit potential of traditional stocks. .

Source: Reuters + Forbes