Gold has been an investment hit over the past two years. However, will it continue to be more expensive, or will calm the macroeconomic and geopolitical situation to make the price of precious metal fall? In this text, I will analyze what is happening on the market and I will try to predict what can happen in the next few years.
Gold and his role in the economy
However, I will start from scratch – what gold matters in the economy.
Gold has been a unique role in the world for millennia – both as a means of exchange and values. And this happens for a reason. It is about its durability, which makes it simply suitable for beating coins. The latter meant that from antiquity to the 20th century gold was the basis of monetary systems. Gold coins were accepted all over the world – they were a universal means of payment. It wasn’t until 1971 that the United States decided to mix up – the dollar exchanges in gold, which ended the era of “hard money”. However, this did not weaken precious metal – at least in terms of its price – this has been growing since then. Reason? Fiat currencies (based on our faith that they have value) lose value and gold is growing.
Today, investors treat ore as a “safe haven” in times of economic crises, wars and political uncertainty. It is added to the private portfolios of investors and reserves of central banks – states accumulate gold to strengthen the stability of their currency and build investors’ trust. Gold protects us against currency inflation and devaluation. In addition, it is still used in jewelry, electronics production (due to the excellent electrical conductivity and corrosion resistance), medicine (in dentistry, implants and nanotechnology) and on the cosmic market (construction of satellites and spacecraft, as well as suits, which are thus protected from radiation).
Of course, the fact is also influenced by the fact that gold supply is limited. Although the first controversy is already appearing in this field. The conquest of space can make the supply of gold increase. The same applies to the Arctic, where with the melting of the glaciers, the possibilities of reaching the metal deposits will increase. This may resemble the situation from the period of geographical discoveries, when the inflow of gold to Europe uncontrolled at some point broke the valuation of this metal.
What drives gold growth?
I will now go to the issue of gold valuation. This is a much more complex issue than many think.
The gold rate has grown over the past months due to the uncertainty that has prevailed in the world. However, it was unfair to accuse Donald Trump, who barely began to rule in the US introduced a lot of apparent chaos. About this in a moment. First, take a look at the gold chart:
It is clear that the course began to grow during the Covid-19 pandemic period. It’s obvious: anti -coovid shields and universal reprint began to pump the price. Investors began to prepare for an inflation jump, which actually took place at the time of defrosting the economy. Along the way, there was a stronger shot after Russia’s attack on Ukraine in 2022, then a correction, when it turned out that the conflict did not spill into Europe. However, since autumn 2022, the price is almost continuously – with obvious corrections – it is growing. The biggest explosion began in 2024, when Trump had not yet ruled in the US and it was not certain that he could return to the White House at all.
But why have we been observing increases in recent years? It is the fruit of growing uncertainty in the world, in which another game of powers to rule on the globe takes place. In addition, the Fed, the most important central bank, conducts a cautious monetary policy: after Pandemia it did not return to quantitative loosening, but only partly only reduced interest rates. As a result of the last demand for risky assets, it remains not as great as it could be. This can be seen on the Altcoin market – these do not get more expensive, and the capital for months has sailed to Bitcoin, and now to Ether. The market chooses safer cryptocurrencies.
All this can change, however, already in September. The Fed may begin to reduce interest rates and this year cut them two or three times, i.e. from 50 to 75 PB.
For the golden cut feet, however, they will mean problems – potential drops, because the market will receive a signal that it is worth getting rid of expensive ore and apologize with cheap altcoins or generally risky actions and assets. It is slowly valuing this scenario: capital returns, for example, to Intel, who has hard years behind it.
War or peace?
In addition, the end of the war in Ukraine may be bad for gold. However, will it happen? This is a more complicated matter.
Russia strives to conclude a peace treaty and classes permanently parts of Kiev. The latter only wants to suspend weapons. Reason? Political: The suspension of the conflict will mean that Ukraine does not recognize the permanent occupation of its territories. However, this will also bring the risk of war again when both sides regenerate their strength.
And this is where the key to fully understanding the geopolitical situation in Eastern Europe is. Whatever happens in the coming weeks, the room will not come for a long time. The current situation resembles what happened during the Napoleonic wars or World War II. During these conflicts, various peace treaties were concluded. Only that it did not mean the end of the greater war. A geopolitical process is underway – the formation of a new world order. For gold this is great news, because it means further armed conflicts, and therefore uncertainty that is beneficial to the precious metal market.
Not only that, the US conflict with China is still not resolved. Donald Trump introduced a lot of apparent chaos related to customs on the dance floor. At the beginning he chose tactics to get along with the Middle Kingdom. Only that the latter showed him during this period that it has strong cards – blocked, among others Export of rare lands to America. This announcement of a greater war, because Washington cannot allow another hegemon in the world that controls the flows of broadly understood capital. It was for this reason that Japan attacked the US in 1941, and the Third Reich challenged the world. The idea was that no one could cut off these countries from raw materials. The Germans wanted to win it by taking over, among others Oponing areas of the USSR, and the country of cherry blossoms was provoked by the USA with crude oil sanctions and tried to take Indochina resources.
For gold, further wars are nomen omen pus – something that will drive the growth engine.
Summary: buy or sell?
Long -term gold may be more expensive, although a potential stronger correction that can be provoked by the Fed (foot cutting) or temporary end of the war in Europe.
In a very long time, the situation on the gold market is not certain at all. The operation of deposits in the Arctic or even in space can reduce the value of precious metal. However, we are talking about a very long time horizon. Over the next few years, bullshit Hodlers can rather sleep peacefully.
