Gold's Growth

The current spot price for gold is approximately $4,284 per ounce, though this value fluctuates throughout the day. Other current prices include about $137 per gram and $136,800 per kilogram.

Gold's value is increasing due to a combination of geopolitical uncertainty, economic concerns, and strong demand from both central banks and investors. Geopolitical tensions and conflicts have made gold a "safe haven" asset, while economic factors like U.S. debt, inflation worries, and potential interest rate cuts have driven both institutional and individual investors to seek more stable stores of value. Furthermore, central banks, particularly in emerging markets, are buying large quantities of gold to diversify away from the U.S. dollar.

Investor and central bank demand.

• Geopolitical risk: 

Gold is seen as a safe asset during periods of conflict and instability, with ongoing wars in Ukraine and the Middle East pushing investors towards it. 

• Economic uncertainty: 

Concerns about the U.S. economy, including the government shutdown, high debt levels, and inflation, have made investors seek assets with more stability than stocks. 

• Central bank purchases: 

Central banks are buying gold at a record pace to reduce their reliance on the U.S. dollar and diversify their reserves. 

• Investor access: 

The rise of gold exchange-traded funds (ETFs) has made it easier for individual investors to buy gold, further increasing demand. 

Economic factors

• Weakening U.S. dollar: 

The U.S. dollar has been under pressure due to factors like U.S. debt concerns and potential interest rate decisions, which makes gold cheaper for holders of other currencies and increases its attractiveness as an alternative. 

• Inflation fears: 

Investors are buying gold to hedge against the risk of rising inflation, as its value often holds steady or increases when the purchasing power of fiat currencies declines. 

• Interest rate outlook: 

Anticipation of U.S. Federal Reserve rate cuts can weaken the dollar, supporting higher gold prices. 

• The price of gold is skyrocketing. Why is this, and will it ...

5 days — The more likely explanation for the current gold price rally is growing demand from gold exchange-traded funds (ETFs).

Gold prices and volatile crypto markets have a relationship, though it's complex and evolving. Both can be seen as inflation and uncertainty hedges, sometimes moving in the same direction as investors seek "debasement trades". However, crypto markets have become more correlated with tech stocks and risk assets, while gold often moves in the opposite direction of Bitcoin due to differing risk profiles, although recent trends have seen them both rise simultaneously due to broad market uncertainty. 

How they are related

• Debasement trade: 

In times of high inflation or decreasing confidence in government-backed currencies, investors may buy both gold and cryptocurrency as a hedge against a devalued dollar. This can cause both assets to rise at the same time. 

• Risk-on/risk-off: 

Gold is considered a traditional safe-haven asset, while Bitcoin is a more speculative, riskier asset. When markets are volatile, investors often move away from riskier assets and into safer ones like gold. This can cause Bitcoin to fall and gold to rise, or vice-versa, according to some studies. 

• Diverging trends: 

In recent years, crypto markets have become more integrated into the broader financial system and now often show a stronger correlation with tech stocks (like the NASDAQ) than with gold. This means that market risk appetite (whether investors are feeling optimistic or pessimistic) can influence crypto prices more directly than gold prices. 

How they are different

• Correlation changes: 

While there was a period where gold and Bitcoin prices moved in a relatively tight correlation, this is not always the case. More recent performance shows a divergence, with Bitcoin acting more like a risk asset and gold continuing its role as a safe haven. 

• Investor preference: 

If gold prices show a strong upward trend, investors might favor the more stable asset (gold) over Bitcoin. Conversely, when gold is relatively stable, investors might seek higher returns in more volatile assets like Bitcoin. 

Whatever way you look at it, investing in your future is the best bet you’ve got of staying on top. Keep the optimism, but tread carefully to avoid risk.

Take care!

Prof. Carl Boniface