6 reasons that support the increase in gold prices

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6 reasons that support the increase in gold prices

 bullish gold

 Gold prices rose strongly during trading today, Friday, and continued their gains for the third consecutive day, especially after the US Federal Reserve’s decision to boost interest rates by only 75 basis points last Wednesday, which boosted demand for the alpha-beta brass and significantly weakened the US dollar in trading.


 During today's trading, spot gold contracts rose by 0.59% and recorded about $1766.28 an oz .Meanwhile, gold futures contracts recorded about $1,763.85 an oz, a rise of 0.77%.


 The dollar index, which measures the performance of the US currency, declined during today's trading and settled below 106.00 points, and scored about 105.59 points, down by about 0.71%, and thanks to the inverse relationship between the two parties, gold prices were suffering from the strength of the US dollar.


 Gold prices rose strongly, coinciding with the strengthening of calm optimism about the tightening folks monetary policy at a very accelerating pace, in light of the US Federal Reserve's decision to boost US interest rates by only 75 basis points last Wednesday due to its fears of an American economic recession.


 In light of the high US inflation, and therefore the strengthening of the chances that the US Federal Reserve will not accelerate the pace of raising interest rates during the remainder of this year, gold found strong support and commenced to regain its luster and rose towards the level of 1770 dollars an ounce.


  additionally, the negative US economic process data yesterday, Thursday, contributed to the increase of gold with full force because it reinforced fears of recession in the US economy, because the estimated reading of the gross domestic product in the United States showed a contraction of US economic growth by 0.9% during the second quarter of this year, including It differs with expectations that indicated a growth of 0.4%, and therefore the  previous reading of the index had witnessed a contraction of the index by 1.6% during  the primary quarter of the year.


 6 reasons that support the increase in gold prices


 John Blasard, an expert in investments at Bank Mirabaud, told the French magazine Le Point: Gold negatively surprised experts and therefore the  public at the beginning of the Corona epidemic crisis, after it lost 20 percent of its value, although this decline is traditional. He added, "In every crisis, whether the crisis of 1098, 2000 or 2007, we witnessed the identical scenario."


 At first, the costs of the yellow metal began to decline, which prompted investors to sell to get liquidity and face the lack of commitment of their customers, then rose to turn into a safe haven.


  the worth of an ounce exceeded the record level it reached in September 2019, which is $ 1921, after its price quickly reached $ 2,000, and only the foremost daring, like Jean Blassar or Benjamin Luffy, an expert at Ofi Asset Management, risked anticipating this,  consistent with Le Point, due to concern about the continuing health crisis. the depth of the economic recession. 

 the worth of gold increased by 33% compared to last March, and it seems that the increase will not stop soon for six reasons:

  1.  Continuing the implementation of monetary policies recommended by central banks within the coming months, because the majority of governments in the world pumped money through central banks to provide liquidity and revive economies at a very low interest rate, additionally to the decline in the yield of US bonds to less than -1 within ten years.
  2. Implementing expansionary fiscal policies to support the economy, while the epidemic has not been contained, and economic recovery would require  accompanying financial and social measures to build a post-digital world.  In Europe and therefore the United States, talk about rebalancing the budget is no longer a priority.
  3. The high demand for gold by the normal players, namely central banks,  also as the actors that affect less so far on gold, which are investment and insurance funds, with a decrease within the  purchase of jewelry by 40 percent, which represents thus far a third of the demand.
  4. The state of political instability that characterizes the planet because of the US elections, the Sino-American conflict and Brexit.
  5.  The disappearance of the most  obstacle, which is that the lack of returns (no interest and no division of profits),and therefore the competing bonds, with reduced rates, don't earn almost anything. And individuals weren't mistaken when they bought gold during the past weeks, as sales increased by 15 percent, consistent with the figures of the Gold Network, in exchange for cash or through ETF products.
  6. His role as a haven within the face of financial markets in the face of volatile financial markets that may suffer from a decline in corporate results.


 gold base

 Gold has always played a crucial role in the international monetary system. the primary known gold coins in history were minted on the orders of Crusius, king of Lydia (a region in present-day Turkey), in 550 BC. Gold was wont to  make currency in many countries before being converted to paper currency.


 But even those paper currencies retained a robust connection with gold, through what's known as the gold rule: a monetary system that was based on the use of gold as a base or standard to determine the value of a country's paper currency, by linking it to a hard and fast  amount of gold. Local currencies were freely converted into a specified amount of gold after a hard and fast price was adopted for buying and selling gold.


  thereunder rule, anyone could offer  paper money to the government and demand in return for it the equivalent in value in gold.

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