Can it reach $5,000?

The price of gold has exceeded $4,000 per troy ounce in recent hours and continues to break new records every day. So far this year alone, raw materials have reached 52 new all-time highs and its profitability exceeds 50%, the highest since 1979, the year in which the oil crisis broke out after the Iranian Revolution. The safe haven asset par excellence shines more than ever in the heat of a context marked by geopolitical and economic uncertainty.

Who are the buyers backing this rally? On the one hand, there are the central banks, responsible for 94% of the rise in this raw material from 2022they explain from the manager Generali Investments. These organizations have quintupled their acquisitions by freezing Russia’s dollar assets after the invasion of Ukraine. Secondly, there are financial investors, which include both institutional investors (banks, insurance companies, pension funds, investment funds…) and individuals.

Their purchases have been carried out through instruments such as gold ETFs (traded investment funds), which They have raised between 25,000 and 30,000 million dollars so far this yearwhich is equivalent to approximately 10% of annual mining production. On the other hand, the hedge funds (hedge funds or hedge funds) have concentrated about half of all their exposure to raw materials in the US markets in gold.

“Investors are sailing blindly trying to interpret the true economic situation”

And there are also the expectations. In principle, the main market consensuses anticipate new rate cuts in the United Stateswhich could be more significant now that Stephen Miran, President Trump’s trusted advisor, is part of the Federal Reserve (Fed) board. Added to this is that Jerome Powell’s term as president of the organization expires next May.

Those $4,000 per ounce are not just a round number, they are a “sign of distrust towards traditional markets and a search for security in the midst of an environment that is becoming increasingly complicated,” says Sergio Ávila, analyst at the IG broker. The expert recalls that the US economy has been partially closed for two weeks, which has blocked the publication of key macroeconomic data. “Without those references, Investors navigate blindly trying to interpret the true economic situation“he points out.

An ounce of gold at $5,000?

Analysts explain that a looser monetary policy by the Fed could generate more inflation and consequently cause a rise in long-term interest rates, leading to a fall in bond prices, declines in equity markets and an erosion of the dollar’s status as a reserve currency. “This environment would be favorable for safe haven assets“It is estimated that if just 1% of the private capital currently invested in US public debt were diverted into gold, the price could reach almost $5,000 per ounce,” the firm maintains.

Vontobel highlights the numerous factors that can contribute to the price of gold continuing to rise. Structural factors, such as the weakening of the dollar, concerns about the US debt and government shutdown, the independence of the Fed or elevated geopolitical risks; and cyclical factors, such as the weakening of the US labor market, Fed rate cuts or fear of the impact of tariffs on growth, among others.

They also see a favorable context for a greater revaluation from the Swiss private bank Julius Baer. They also cite the cooling of the US economy, along with the prospects of lower interest rates and a weaker dollar, which should “continue to attract investors seeking safe-haven assets, and central bank purchases should continue.” Their experts see a “very limited” probability of a major correction, although They do not rule out a temporary setback due to market optimism.

He Gold is still a barometer. “Its quantity in the world is growing slowly—around 1.5% annually due to mining production—which makes it a reserve of value against currencies that multiply due to monetary policies,” explains economist José Manuel Marín Cebrián. When gold rises in dollars, euros or yen, it is actually revealing the loss of purchasing power of those currencies. ““It is a mirror that reflects distrust in the current monetary system.”he adds.