The gold price has jumped to a new all-time high, but is it too late to join the party?
Gold prices have rallied to a new all-time high. The bulk of the bullish mood has taken place over the past two months, and it’s caught a lot of traders and investors by surprise.
Between January and the end of March, Google Searches for gold hit their highest levels since 2020 as investors looked to see if it was time to jump on the bandwagon.
Prices for the yellow metal hit another record high of $2,355 (£1,856) yesterday, driven by extended reserve-buying from China, a trend now on a 17-month hot streak.
And China’s not the only country to be upping its gold reserves.
Central banks are buying gold
On a year-to-date basis, central banks added 64 tonnes of gold to their reserves in January and February, 43 per cent lower than the same period in 2023 but a fourfold increase over 2022.
Data from the World Gold Council show that demand from central banks totalled 1,037 metric tonnes last year, just below the previous year’s record.
However global producers extracted just over 2,644 tons in 2023, only one per cent more than the previous year.
Ongoing geopolitical conflicts in the Middle East and Ukraine continue to drive the flock to the safe haven asset. Despite intensified efforts to demand a ceasefire in Gaza, the lack of any clear progress means concerns are running high.
All this has been great news for investors in gold, with prices up some 30 per cent in the past six months.
Adrian Ash, director of research at online gold marketplace BullionVault, said: “While the size of gold’s price gain isn’t unprecedented, its strength is.”
“So too is what’s underpinning this bull run, with heavy profit-taking by Western investors offset by central banks led by China continuing to hoard bullion as Chinese households also keep buying amid the country’s real-estate slump and economic slowdown,” he added.
How high can the gold price go?
The big question in the markets now is whether gold has a ceiling given the perfect storm of factors driving its price upwards, and if so, what that ceiling could be?
Hal Cook, senior investment analyst at Hargreaves Lansdown, said: “Towards the end of 2023, the big question was whether the gold price would stay about the $2,000 level but, it hasn’t just stayed above this level, it has continued to rally.
“Perhaps it will be the $2,500 (£1,971) level which might act as a new technical limit for traders, only time will tell, but with heightened geopolitical risk, central bank buying and the potential for inflation to tick up a bit more from here, it feels unlikely that the rally will end anytime soon”.
Gold’s all-time run is nearing the 25th anniversary of then-UK Prime Minister Gordon Brown’s decision to sell over half of the country’s gold reserves.
This equated to roughly 395 tonnes of gold bullion at an average price of $276 (£217) per ounce, totalling around $3.5bn (£2.7bn).