Gold Reaches Highest Price Ever

Gold was trading at record high prices last week as rising geopolitical tensions, a weakening dollar and expectations of an interest rate cut by the U.S. Federal Reserve buoyed demand for the precious metal. Prices went up by as much as 3% at the start of the week to hit $2,135 per ounce, surpassing August 2020 prices, which hit a record $2,072 before falling to around $2,023 on Monday at noon.

A combination of varied factors has caused gold prices to skyrocket in recent weeks after rising interest rates and a stronger dollar consistently battered them.

The conflict between Hamas and Israel triggered fears of a broader conflict in the Middle East region that could potentially disrupt oil supplies and impact the global economy, increasing gold’s safe-haven appeal and causing prices to surge. Investor expectations of an interest rate cut by the Fed have also reduced the pressure on gold prices.

The Federal Reserve has increased benchmark interest rates for several months in a row to curb inflation, a relatively successful approach that also increased the opportunity cost of holding gold bullion and reduced investor interest in the precious metal as they turned to assets that pay interest. However, now that the Fed’s aggressive interest rate hikes have cooled inflation in the economy, investors are hoping that the Fed could start cutting interest rates as early as March 2024, and their speculations are positively impacting gold prices.

A fall in interest rates would also impact the already-falling U.S. Treasury yields, causing demand in such yields to reduce as investors turn to assets such as gold that don’t pay out interest. Sucden Financial’s head of research Daria Efanova explains that with expectations of the end of rising borrowing costs impacting prices, longer-term yields have seen their performance drop, creating a much more conducive environment for gold, a nonyielding asset.

According to World Gold Council market strategist Jogn Reade, investor predictions of several interest rate cuts through 2024 could cause gold prices to surpass the historic levels registered last week. The interest-rate cut predictions have also placed downward pressure on the greenback as fiat currencies typically increase in value as interest rates rise.

November saw the U.S. dollar slump by 3%, which made it less expensive for foreign investors to purchase dollar-priced gold, increasing the precious metal’s prices. If the U.S. Federal Reserve embarks on several interest rate cuts in 2024, we can expect the resultant drop in dollar value to boost gold prices even further.

The current market conditions favor gold exploration companies such as Reunion Gold Corp. (TSX.V: RGD) (OTCQX: RGDFF) as investor interest usually climbs a notch when the market prices of gold rise.

NOTE TO INVESTORS: The latest news and updates relating to Reunion Gold Corp. (TSX.V: RGD) (OTCQX: RGDFF) are available in the company’s newsroom at https://ibn.fm/RGDFF

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