Reason Behind Gold Price Surge...'Dollar Weakness and Inflation Concerns'

US-China Conflict, Concerns Over US Economic Slowdown

[Asia Economy Reporter Naju-seok] As gold prices approach an all-time high, the countdown to a new record has begun. Global investment banks such as Goldman Sachs have already predicted that gold prices will exceed $2,000 per ounce, fueling the rise in gold prices. Meanwhile, the value of the US dollar continued to decline. Safe-haven assets are experiencing mixed fortunes.

The rise in gold prices is attributed to a series of concerns, including the resurgence of COVID-19 and the US government's closure of the Chinese Consulate General in Houston. The announcement that other consulates could also be closed has intensified tensions between the US and China, raising market concerns.

Both gold and the dollar are safe-haven assets sought by investors during economic crises, but recently, the trends have diverged. Not only geopolitical risks but also concerns about the value of the dollar have driven the upward trend in gold prices. Since gold is traded in US dollars, a decline in the dollar's value means an increase in gold prices. On this day, the dollar index recorded 94.692, the lowest level since September 2018.

Additionally, due to COVID-19 concerns, central banks worldwide have secured dollar liquidity and lowered interest rates to record lows, encouraging the acquisition of gold instead of dollars. The decline in bond yields caused by interest rate cuts has relatively increased the investment value of gold. Some experts believe that the economic stimulus measures poured out by governments will ultimately lead to inflation.

Ellen Hazen, portfolio manager at F.L. Putnam Investment Management, told the Wall Street Journal (WSJ), "There are already many reasons to consider putting money into gold as a wise choice."

This content was produced with the assistance of AI translation services.