Global Gold Rush: Investors Seek Security Amid Geopolitical Turmoil

A global surge of interest in gold has emerged among investors, commonly referred to as "gold fever." However, this trend differs significantly from the gold rushes of the 19th century in the United States and Australia. Today's investors are not prospecting for gold in mines; instead, they are purchasing the precious metal as a hedge against geopolitical instability and rising inflation.

Since the onset of Russia's military aggression in Ukraine over the past two and a half years, demand for investment gold has steadily increased worldwide. This trend includes a diverse range of investors, from major governments to individuals investing a few thousand dollars in gold. As a result, the market price of gold has been on the rise, with a reported increase of over 25 percent since the beginning of 2024, reaching more than 2,700 dollars per troy ounce, according to data from the specialized platform "Investing," cited by BTA.

Despite this bullish trend, not all investors are convinced that gold is a reliable safeguard against money depreciation during inflationary periods. This year, gold prices have risen alongside decreasing inflation rates. Following the Russian invasion of Ukraine in early 2022, when consumer prices soared in Europe and the US, gold initially reached over 2,050 dollars per troy ounce. However, its value subsequently fell to below 1,650 dollars per troy ounce by early October of the same year, even as inflation continued to climb.

Some investors argue that the optimal time to purchase investment gold is not during periods of rising inflation but rather when central banks start lowering their key interest rates. They suggest that gold becomes more appealing when returns on bonds and bank deposits diminish, as highlighted by the Financial Times.

Supporters of gold as an investment often claim it provides a protective measure during geopolitical crises. Yet, it is noteworthy that gold did not experience significant price increases during the recent escalation of conflict in the Middle East, involving military operations by the Israeli army against Hezbollah and missile attacks from Iran.

Joni Teves, a gold market analyst at UBS's Singapore branch, notes that the price fluctuations of gold are not always driven by market logic. "It would be much easier if we could point to one specific reason for gold's strength this year. In reality, however, its appreciation was driven by a combination of factors, with significant amounts of the precious metal being bought in conditions of lack of substantial supply," she explained.

Teves predicts that the price of gold will continue to rise, driven by factors such as potential reductions in key interest rates in the US and a possible weakening of the US dollar. She has adjusted her forecast for the metal's market value at the end of this year to around 2,800 dollars, an increase of 200 dollars from her previous estimate. Furthermore, she anticipates gold reaching 3,000 dollars by the end of 2025, marking a significant rise from earlier projections.

Meanwhile, the Dutch investment firm Robeco emphasizes the importance of considering skepticism regarding gold's continual price increase. Arnout van Rijn, a portfolio manager in Robeco's multi-asset investment team, stated that while they do not label themselves as "gold diggers," they have begun to invest tactically in gold alongside their substantial investments in commodities. He highlights two primary reasons for Robeco's interest: the ongoing accumulation of gold by major central banks and the increasing wealth of investors in Asia, who are channeling significant funds into the precious metal.

Van Rijn observes that as gold attracts new buyers, it is challenging to envision a major price decline in the near future, asserting that the heightened demand from investors will only further drive prices upward.