Gold hiked by 7% in October. Surprisingly, it's still not late to invest in this precious metal
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The XAU/USD skyrocketed during the autumn months – and we could not help but notice such an unusual for precious metals volatility. What drove this rapid increase in the price of gold, and is it too late to include it in your investment portfolio?
When faced with uncertainty or events that are difficult to comprehend, the most popular strategy is to invest in gold. A perfect combination of enduring appeal and global recognition as a valuable asset. That was the case in October, when the Israeli-Palestinian conflict in the Middle East boosted gold spot price, as evident in the provided chart.
To gain a better perspective, let’s check how gold performed during the initial stages of the military conflict between Russia and Ukraine.
Of course, it doesn’t mean that geopolitics is the sole factor influencing the gold price, however political changes and conflicts play a pivotal role in its value.
Generally, there are three key factors to consider when it comes to the XAU. First, gold is considered to be a defensive asset. Second, its historical trend has shown price increases over time. Third, the gold moves inversely with the value of the USD. And the last one is what we need to pay attention to.
The Federal Reserve's aggressive policy made the US dollar resilient. In other words, the USD has maintained its strength, and yet gold has continued to rise in value.
It's expected that the US dollar will likely remain at a similar support level through the end of 2023, which may exert pressure on the price of gold during this period.
The following year is likely to alter balance as the Fed may hint at the possibility of lowering interest rates before initiating such a policy. Both of these developments are favorable for gold. Furthermore, considering the ongoing global crises, it’s unlikely that people will stop looking for defensive assets in 2024.
It appears that the XAU/USD will continue to be influenced by several growth drivers. However, it's crucial to remember that the modern world is characterized by rapid change, and it's advisable to conduct your own analysis before making any trading decisions.