It’s not enough to merely mention that gold is nearing its peak because the precious metal has steadily renewed its historic highs since the year began. The XAUUSD has shown a 14% growth over the first three months: now, the question arises whether the gold will shine even brighter soon or if investors should be ready to hit the “Sell” button.
Let’s take a look at the chart showing XAUUSD movements since the start of 2024. Here, it's evident that considering February’s lows, the increase in gold prices has been even more significant – nearly 16%.
Of course, a 16% increase might pale compared to Bitcoin. For example, BTCUSDT has surged by 70% during the same period. However, juxtaposing a commodity and crypto might not be entirely fair. Therefore, let's also add the S&P 500 index to the chart. In this comparison, gold has outperformed.
Three months is a short time span to draw definitive conclusions. Nevertheless, gold has maintained its lead even at a five-year distance. Just think about it: gold, often seen as a stable asset with low volatility, has outpaced one of the world’s main stock indices. There are several explanations for this. Gold tends to be a sought-after asset in tumultuous times. COVID-19, military conflicts in Ukraine and the Middle East, and general geopolitical tension, these things could be categorized as "hard times." Over the past five years, gold has nearly doubled in value.
Unstable periods boost gold’s relevance. World central banks are actively purchasing gold, as well as individual investors who perceive geopolitical and economic risks. Plus, the XAUUSD gains additional support from expectations of an interest rate cut by the Federal Reserve.
The perceived safety of this haven is so high that even significant negative news fails to dent it. For instance, March's US unemployment report indicated that nonfarm payrolls rose by 303K, surpassing expectations, and the unemployment rate dropped to 3.8% (lower than anticipated). While this decreased the likelihood of a June interest rate cut by the Fed, it didn't hinder gold's ascent. Among other headwinds, experts mention the possibility of big players selling their positions at specific levels.
However, global conditions suggest that gold still has room to grow. Major central banks may find themselves compelled to reduce interest rates (with the Fed being our primary focus), which could act as a new catalyst for XAUUSD. Additionally, the number of global conflicts and tensions doesn't seem to be diminishing.
Just bear in mind that circumstances can change swiftly and require your own careful analysis.
