Geopolitical instability driving rush to purchase gold
Independent metals analyst Robin Bhar speaks to CGTN Europe about the rise in gold prices.
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00:00 Amid global political and economic fragility, the value of one precious metal is surging to almost record levels.
00:07 The price of gold has jumped by 12% since the start of February and currently sits at $2,304 an ounce.
00:14 Geopolitical unrest is one driver of the increase, with conflicts in Europe and the Middle East fueling uncertainty.
00:20 And that's prompted investors to flock to gold, traditionally seen as a safe haven in times of economic turbulence.
00:26 Central banks in the United States, the UK and Europe are also stimulating demand after foreshadowing interest rate cuts later this year.
00:34 China's central bank is also riding the wave. The People's Bank of China now owns 73 million ounces of gold.
00:41 It added gold to its reserves for a 16th straight month in February.
00:45 Along with China, India leads the world in gold consumption, largely due to the important role it plays in weddings.
00:52 But analysts predict that the sky-high prices will reduce demand heading into the summer wedding season.
00:58 Let's talk now to Robin Barr, who's an independent metals analyst. Good to see you, Robin.
01:02 So, what is behind this gold price rise? We know, of course, investors buy gold during troubled times. Is that what we're seeing now?
01:11 Yes. I've always believed you had to be fearful of events, geopolitics, economic uncertainty to want to have gold.
01:22 And I think we've seen a broad base of buying from central banks, as you've mentioned,
01:29 institutional buyers, investors and speculators who believe that this is the time to hold gold, to hedge against inflation,
01:42 proving to be a lot stickier than believed, and all these uncertainties that we have at present.
01:50 What about US interest rates, though? When they're high, that usually dampens the gold price, but that doesn't seem to have happened this time.
01:59 Gold's been very resilient to higher interest rates, I think because they signify that the economy is strong globally,
02:11 particularly the US economy, which has proven extremely resilient to these interest rate increases.
02:19 And now we can look forward to interest rates being cut, which, of course, will provide a very strong tailwind, we believe,
02:29 to further increases in the gold price.
02:33 What about the jewellery effect, let's call it? How will that affect the price going forward?
02:39 That will perhaps undermine some of the momentum in the gold price, but I think there's other factors that will outweigh any subdued jewellery buying out of India or China.
02:54 So we wouldn't be too worried.
02:57 I think investment into ETFs, bar and coin, and other forms of bullion investment should more than outweigh any softness in jewellery demand going forward.
03:11 And of course, if central banks cut rates, that's more disposable income to consumers who perhaps might load up on gold in the form of jewellery.
03:22 So where is the gold price going next? You think we've seen these record highs. How high can it go?
03:29 I think we need to see a bit of a correction. It's done a lot in the last few weeks.
03:35 So I think a dip should be the order of the day.
03:40 But I think that will be strongly supported and a medium term target by the end of the year getting towards $2,500, you know, shouldn't be a surprise.
03:53 So slowly higher from here.
03:56 And is gold unique in seeing these record high prices? What about other metals? Are they seeing similar rises?
04:03 We're starting to see because of the energy transition globally demand for critical raw materials, things like copper, tin, which connects the Internet of Things,
04:18 lithium, cobalt coming off their lows and starting to participate in a fairly broad commodity based rally.
04:27 Of course, the oil price is near the $90 per barrel level. So it does seem to be that commodities are in an upward bias from now on.