Gold Glitters Up

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Koushik Korampalli

August 28, 2024

Written by Koushik Korampalli

Est read: 0 minutes

Gold has been on a strong run since 2022 and has recently shot up further
- This is mainly due to anticipations of a Fed rate cut in September (See edition 27) but there are other reasons
- For the past year, Chinese investors have turned to bonds and gold as a measure to fight against the uncertainty around their housing market and private equity
- India received a cut in import duties and combined with the upcoming Diwali festival, demand for gold has risen
- Geopolitical tensions in the Middle East also supported this rise
On Tuesday prices rose to $2531 per ounce
- Gold backed ETFs rose their holdings by an equivalent of $7.3bn
- An ETF is an Exchange Traded Fund, it is a fund that is based on several securities combined to reduce volatility
Why does a rate cut lead to more gold demand?
- Lower interest rates also diminish the likely returns of stocks and bonds, diverting people towards alternatives
- A cut in interest rates leads to a weakening of the dollar
- Gold, which is priced in dollars, therefore decreases in price, causing more buyers