David Higgins,
Head of Trading,
Merrion Gold
Gold broke through $4,000 for the first time this week, continuing a remarkable year for the yellow metal, currently 55% higher than it was on January 1st.
While not unexpected, the pace at which gold has overtaken this mark has surprised most analysts – especially considering the yellow metal only broke through $3,000 for the first time in March of this year. Merrion Gold has seen an upsurge in new customers this year in a trend mirroring the uncertain and inflationary periods after the Covid lockdowns and the Russian invasion of Ukraine. Such a surge may put off some potential new entrants to the market, but looking at precedent this rally may have a lot further to run. Gold increased by more than 110% in 1979 alone, finishing a decade in which prices increased more than 15 fold.
Nervousness about a potential bubble in AI related stocks and the huge amounts of capital being burned through by leading tech companies have been key factors in the rise. wBillionaire investors Ray Dalio and Ken Griffin have both spoken positively in recent days, a marked shift from traditional narratives that saw gold shunned by many fund managers. Regardless of this historic unwillingness to invest in the yellow metal, gold has now gained more than 1,250% against the US Dollar since the beginning of the century – a return which is more than double what the S&P 500 has provided.
Trump’s open preference for interest rate cuts have contributed to this rally, although future events could contribute further. Trump will soon appoint a successor to Federal Reserve Chairman Jerome Powell, with his choice taking office in the first half next year. Worries about the central bank’s independence have already contributed to gold’s rise. However, the rate cuts which a Trump appointee would implement would lead to further dollar weakness – which could see gold rise even further.
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