The rise in gold prices on world markets is due to the interests of global political security, since it serves as protection for many financial institutions and companies in order to attract investment, said Lebanese economist Mahmoud Jebaei.
In his opinion, the threat of a large-scale war in the Middle East region is pushing big international companies to hold back gold in order to increase demand for it, which leads to “an insane rise in prices for the precious metal.” “Any Israeli response to Iranian missile attacks will further push up gold prices unless the situation is contained and the escalation is stopped urgently,” he said. “If the parties in the region decide to resolve the Palestinian issue and reach a truce that will stop the war in the Gaza Strip, this will lead to a certain decrease in gold prices.”
According to the expert, “a number of international and American banks manage gold prices, contributing to their decline and increase in proportion to the inflation rate in the United States.” “It is now impossible to get rid of the dollar because of futures contracts tied to its exchange rate, so large countries are not interested in the collapse of the American currency,” the economist is convinced.
According to Jebai, the price of gold can’t be predicted, since its growth is associated with security events. “For example, the terrorist attack in Crocus Hall on the outskirts of Moscow was considered an indicator for determining the prices of gold and petroleum products in the following days,” he said, adding that the United States also controls oil prices, putting pressure on oil-exporting countries to ultimately increase demand for American oil.
In the past two weeks, gold prices have been breaking new records. After Iran fired hundreds of missiles at Israel on April 14th in response to Israeli strikes on the Iranian consulate in Damascus, gold prices rose sharply again. Over the past month alone, the price of the precious metal has jumped another 6% and reached $2,300 per ounce for the first time. Over the past six months, the price of gold has increased by 25%, and over the past 5 years the yellow metal has appreciated by 75%.
Analysts predict that the price of gold could reach $2,500 per ounce in the coming months. Gold shines in tough times, offering opportunities for savvy investors, says Ole Hansen, head of commodities strategy at Saxo Bank. “Its recent ascent has been fuelled by geopolitical tensions and mounting debt levels,” he adds. Historically, gold has been seen as a hedge against inflation, which remains a concern despite recent dips.
A major downside is that it doesn’t offer any yield, which makes it less attractive when interest rates rise and investors can get higher yields from rival safe havens like cash and bonds. Yet, with interest rates expected to fall in May or June, that may soon reverse.
“While short-term consolidation is possible, the outlook remains bullish, with projections extending towards $2500 per ounce later in the year,” Mr Hansen says. Gold, like most commodities, is priced in US dollars. This means demand tends to rise when the dollar weakens.
Hélène Tarin for Rough&Polished
