The price of gold has continued to hit historic highs over the past year, surging past $2,800 per ounce at one point. Geopolitical risks, soaring global debt-induced high inflation, and significant increases in gold holdings by central banks led by the Chinese Communist Party have continuously strengthened gold’s safe-haven appeal. Additionally, the U.S. election has become another variable influencing the trajectory of gold prices. Amid this turbulent world, it has sparked contemplation about a return to the gold standard for currencies.
As the U.S. election draws near, it further adds to the uncertainty surrounding gold prices. The latest survey by Gold Supplement News indicates that professional analysts and retail traders have differing opinions on the short-term outlook for gold prices.
According to the survey, out of 17 analysts, 9 (53%) expect gold prices to rise this week, 6 (35%) predict a decline, and the remaining 2 (12%) are adopting a wait-and-see approach, awaiting further developments from the election and the Federal Reserve. In an online survey, a total of 139 investors participated, with 85 (61%) bullish, 31 (22%) bearish, and 23 (17%) choosing to watch cautiously.
On the other hand, international gold prices hit another record high on October 30th. The price of COMEX gold futures reached $2791.9 per ounce, briefly exceeding $2,800 per ounce during trading.
According to statistics from the World Gold Council, since 2024, gold prices have hit new highs more than thirty times. The council’s Global Gold Demand Trends report for the third quarter of 2024, released on October 30th, revealed that global gold demand for the quarter increased by 5% year-on-year to 1,313 tons, reaching a new high for third-quarter demand. The total gold demand for the quarter surpassed $100 billion for the first time, also setting a new historical record.
Since the second half of last year, gold prices have been on a continuous upward trend. On October 18th, the price of COMEX gold futures broke through the historic $2,700 mark for the first time, marking the 34th historic high of 2024. Subsequently, gold prices continued to rise, setting new record highs three times in just five days. The cumulative increase for the year has reached 32%, the largest gain since 1980.
The trend of continually rewriting record highs for gold prices may persist, as financial experts believe that surpassing the next major milestone of $2,800 per ounce may not take much time. A report by UBS strategists on October 25th stated, “We continue to view gold as attractive and anticipate further increases, expecting gold prices to approach $2,850 per ounce by March 2025.”
“Over the past year, robust demand for safe havens has driven the miraculous continuous record-breaking rise in gold prices,” noted US-based economist David Huang in a statement to The Epoch Times.
The enduring uptrend in gold prices is driven by a risk-averse approach to “turmoil gold.” However, it is noteworthy that during significant economic fluctuations in the past, there has been a seesaw pattern between gold and the U.S. dollar, where an increase in the US dollar index often led to a decrease in gold prices and vice versa. Yet, over the past year, this pattern has changed, with the rare occurrence of simultaneous increases in both the US dollar and gold prices.
Huang analyzed that the simultaneous rise of the US dollar and gold in recent times, in contravention of the typical trend, is due to multiple global risks simultaneously challenging markets, intensifying hedging motivations. Factors such as the US election, the Russia-Ukraine conflict, and geopolitical tensions in the Middle East have swiftly increased demand for gold, known for its natural hedge properties, while the US dollar remains a strong safe-haven asset globally.
North American investment advisor Mike Sun previously told The Epoch Times that uncertainties surrounding Federal Reserve interest rate cuts and escalating geopolitical risks have led to a peculiar phenomenon where investment funds find both the US dollar and gold rising simultaneously.
One of the reasons for the rise in gold prices is the escalation of geopolitical risks, intensifying market’s risk-averse orientation. Apart from conflicts in the Middle East, the military expansion of the Chinese Communist Party in the Taiwan Strait and the South China Sea has heightened the conflict risk in those regions. Additionally, North Korea’s military support to Russia has escalated and complicated the Russia-Ukraine war, further exacerbating the confrontational escalation between the evil axis formed by China, Russia, Iran, and North Korea and the Western free world. This has been cited as one of the motivations for global investors to purchase gold in large quantities to safeguard asset security.
Another reason for the rise in gold prices is the significant purchase of gold by various central banks, with the People’s Bank of China being the biggest buyer. Data from the World Gold Council (WGC) shows that the net gold purchases by the People’s Bank of China in 2023 amounted to 224.9 tons, making it the largest buyer among major central banks and accounting for approximately 5% of global total gold demand that year (4,467.9 tons).
The data from the People’s Bank of China indicates that its gold reserves have reached 2,264 tons. In June 2024, the People’s Bank of China ended an 18-month spree of gold purchases, causing gold prices to drop by over 2% overnight.
The inflation pressures in the United States and other Western countries, along with the surge in global debt, have heightened capital market’s risk aversion sentiments, becoming the third major reason driving the rise in gold prices.
Huang mentioned that after the outbreak of the pandemic, central banks of major economies globally adopted loose monetary policies and raised inflation targets, resulting in increased debt and further fueling the demand for gold as a hedge. During this period, geopolitical tensions have also escalated, further reinforcing the strong reliance of markets on the US dollar, supporting the unusual phenomenon of gold and the US dollar rising simultaneously.
In 1971, the US dollar delinked from gold, entering the era of fiat currency, where various countries’ currency issuances were no longer anchored in gold but primarily in debt. Nonetheless, gold reserves of central banks still underpin the final settlement of national currencies. Currently, countries have over-issued currencies, accumulating astronomical debt figures that are challenging to repay.
Data released by the US Department of the Treasury in July revealed that the US national debt has surpassed $35 trillion, reaching a new historical high. The Chinese government’s official debt, announced in September, exceeded RMB 70 trillion (approximately $9.8 trillion) by the end of 2023.
However, data from the International Monetary Fund (IMF) shows that in 2022, China’s local government debt alone reached RMB 92 trillion (about $13 trillion), accounting for 76% of the GDP. External estimations suggest that the actual debt surpasses the officially announced figures significantly.
Amid the continuous rise in national debts posing potential economic crises, some economists believe that a return to the gold standard might be on the horizon. American libertarian economist Llewellyn H. Rockwell, Jr. stated that amidst rampant inflation, the US market must shift back to a gold standard. He believes that the financial system relying on fiat currency has exceeded its limit.
In an article published by Forbes magazine in May, editor-in-chief Steve Forbes expressed disbelief but noted that the world “seems to be turning towards a gold-based monetary system.” He also remarked that the substantial gold purchases by central banks, the rise of cryptocurrencies, and the surge in global debts reaching $300 trillion, triple the global GDP, are signs of a potential return to the gold standard for currencies.
However, the likelihood of returning to the gold standard seems to require a lengthy process. Economist Li Hengqing from the American Institute for Economic and Strategic Research stated to The Epoch Times that while the US dollar is indeed facing challenges from some countries’ “de-dollarization” efforts, the issuance quantity of the US dollar remains constrained by diverse factors. As of now, the urgent need for a return to the gold standard is not yet seen.
Huang pointed out, “In controlling inflation stability, the gold standard effectively restrains the impulse of central banks to issue currencies and can significantly suppress inflation. However, with countries holding massive debts, hasty implementation would lead to significant devaluation of national currencies, operationally impeding strong opposition from central banks worldwide. Therefore, the return to the gold standard currently remains largely a theoretical discussion.”