Gold Price Breaks December 2023 Record

March 5, 2024. It took gold three months to break the December 2023 record. How has the price of gold been evolving, what influences it, and what are the possible future scenarios?

Evolution of Gold Price

On December 4, 2023, the price of gold surpassed the $2100 per troy ounce threshold for the first time, reaching as high as $2135 per troy ounce intraday. The gold price thus exceeded the previous record set in August 2023 by more than 3 years.

We expected gold prices to fluctuate and possibly dip after breaking the record. However, gold managed to hold above the psychological $2000 per troy ounce mark for several days.

New Record and Reasons for Rising Gold Price

Today, March 5, 2024, the price of gold reached its highest level during the day at $2136.70 per troy ounce. Gold is often referred to as a safe haven during economic turmoil, geopolitical tension, and other uncertainties. Factors influencing the gold price today may include:

• Geopolitical Tension: War in Ukraine, conflict in Gaza, tensions between the USA and China.
• Central Bank Monetary Policy: Especially the US Federal Reserve, where it is expected that the Fed might start reducing interest rates. However, historically, rates around 5% are not high, and the battle against inflation is far from won.
• Central Bank Purchases: In recent months, central banks have been buying gold in large quantities. Even the Czech National Bank announced its intention to increase gold reserves.
• US Debt: The world's largest economies have hardly reached an unimaginable amount of $34 trillion, which will not be easy to repay in a normal way (cuts in economic spending, tax increases, asset sales, etc.). Instead, it is more likely that they will be "repaid" in an inflationary manner.
• Inflation: It is often presented that inflation is decreasing, however, official statistics and the composition of inflation indicators do not always reflect reality.

Figure 1: Big Gold Nugget (source: Craiyon)

Gold Miners' Stocks

While the price of physical gold is breaking records, gold miners, or generally "gold" companies, have been lagging behind. Gold miners have, at least momentarily, become a paradoxical victim of inflation. Gold is generally a very good hedge against inflation, but due to inflation, mining costs have also increased significantly (energy, fuel).

Various forecasts also emerged about how low the gold price could go. However, the opposite is true – despite higher interest rates (which are not favorable for the gold price), the gold price remains above the psychological $2000 per troy ounce mark.

Another factor could be the outflow of investments from gold miners into bitcoin, which is sometimes referred to as digital gold (not entirely justified). It is possible that some investors who expected gold to perform well in times of inflation were not satisfied and lost patience with the fact that gold mining stocks did not rise as quickly as they imagined (or conversely, they fell), and therefore decided to pour their funds into bitcoin, whose price is experiencing a renaissance, partially caused by the creation of exchange-traded funds (ETFs) focused on bitcoin.

What's Next

No one has a crystal ball, but it can be assumed that the price of gold will continue to rise. Apart from war conflicts, economic problems have by no means been solved (high inflation, debts), currencies tend to devalue. Furthermore, gold has been quite steadily above the psychological $2000 per troy ounce mark, and the room for growth is open. The price of gold often rises sharply and does not look back. Even with increasing mining costs, it is not possible in the long run for the gold price not to react to that. Gold miner stocks, which now seem very undervalued, should follow and benefit from the current and future higher prices and geopolitical and economic uncertainties.

You Might Be Also Interested

• Artificial Intelligence on Price of Gold (2024-01-18);
• Price of Gold Broke the Historic Record from August 2020 (2023-12-04);
• Bet on Gold: Is Gold a Bubble? (2013-07-16)
• Gold: What It Is, How to Invest in Gold Mining Companies;
• Silver: What It Is, How to Get Exposure to Precious Metals;
• Copper as a Barometer of Economy Performance;
• Stocks: What They Are, How to Perceive Them;
• Bitcoin: A Comprehensive Overview.

Based on the original Czech article: Cena zlata pokořila rekord z prosince 2023.