Analyse

Gold prices have risen spectacularly in recent times. From less than USD 1,800 in early 2022, the price of an ounce of gold hit a new record of USD 2,777.80 last October, before settling at around USD 2,600 at the end of the year.

Gold’s rise has been powered by a whole series of factors. First of all, central banks have played a major hand in it, especially those in the BRIC countries (Brazil, Russia, India and China). In a bid to reduce their reliance on the US dollar, they have set about buying gold in vast quantities. Reflecting this, annual demand for gold between 2022 and 2023 exceeded 1,000 tonnes – double the 2021 level and quadruple the 2020 level. These institutions are increasing the proportion of their foreign exchange reserves held in gold. Some of them are worried about possible dollar depreciation. Others are more concerned about the political firepower wielded by the greenback.

The World Gold Council’s 2024 survey of central banks’ gold reserves shows that central banks are bullish about gold’s status as a reserve asset. Close to 70% of respondents expect gold’s position in central bank reserves to increase over the next five years.

Inflation triggered by the post-pandemic economic rebound, supply-chain disruption caused by the renewed lockdown in China and the surge in commodity prices sparked by Russia’s invasion of Ukraine, prompted the central banks in developed nations to hike their benchmark rates substantially between February 2022 and August 2024. Even though these rate hikes tend to weigh on gold prices, again because it does not pay any interest, gold maintains its appeal as a means of safeguarding portfolios against monetary erosion. Interest rates are now moving lower again, as central banks look to support economic activity. With the emergence of a cycle of rate cuts, other factors supporting gold prices have appeared.

Projected growth in central bank gold reserves (5-year forecasts).

Although gold evidently pays out zero yield, it’s the ultimate safe haven, as it has shown time and again throughout history. So it’s tremendously sought-after in times of crisis. And at the present time there’s no shortage of crises. There’s the war in Ukraine, the conflict in the Middle East, the tension surrounding Taiwan and North Korea’s escalating provocations. Granted, gold prices sometimes decline or tread water, but over the past 50 years even bigger rallies have always followed in the wake of such episodes.

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Tuesday 10 December 2024 will go down in history for Bonhôte-Immobilier SICAV. The foundation stone was laid today at the Concept B.180 development, with officials from the city and canton of Neuchâtel in attendance. This event marks the start of construction work.

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