Gold surpassed $3,500 per ounce for the very first time in recordings.
Gold Hitting Record Highs in 2021
Gold shatters records this year, driven by mounting uncertainty around U.S. politics and currency.
Gold prices soared to unprecedented levels in 2021, hitting a high of $3509.9 amid fears of political unrest in the U.S. According to a report by Bloomberg, this surge can be attributed to an exodus of funds from U.S. equities, bonds, and the dollar.
As of 09:36 Moscow time, the gold futures contract with delivery in June on the Chicago Mercantile Exchange stood at $3492.6 (+1.96%). Meanwhile, spot prices momentarily touched $3500. By 09:40 Moscow time, the precious metal was trading at $3480.95 (+1.65%).
Kallanish Index Services analyst Li Lian Le comments, "The swift rise in gold this year suggests markets trust the U.S. less than ever."
In April, the dollar plummeted to a three-year low following attacks by former President Donald Trump on Jerome Powell, the then-Federal Reserve Chair. Trump labeled Powell a "big failure" on social media, demanding immediate rate cuts. This move was perceived as a threat to the Fed's independence, causing the DXY dollar index to fall to 97.923 on April 21, its lowest point since March 2021.
As of 10:04 Moscow time on April 22, the dollar was trading at 81.25 rubles (+0.31%) on the international forex market. The greenback briefly dipped to a minimum of 80.36 rubles.
Gold has experienced a remarkable increase of over a third since the beginning of the year. This rise occurred amid growing trade tensions that impacted the markets. According to Goldman Sachs, gold prices could reach $4000 per ounce by mid-2026.
Fiscal stimulus measures implemented by the Biden administration's $1.9 trillion COVID-19 relief package increased inflation expectations, prompting investors to seek safety in gold. In 2021, lingering trade policy impacts and pandemic-related economic disruptions generated sustained market volatility, supporting the demand for safe-haven assets like gold.
Ultra-low interest rates and expansive monetary policy in the U.S. reduced the dollar's attractiveness, making gold less expensive for foreign buyers. With nominal rates close to zero and inflation rising, real yields remained negative for much of the year, making gold an attractive non-yielding asset.
Global central banks increased their gold reserves following the 2020 pandemic, though purchases in 2021 were not as dramatic as the surge seen in subsequent years. Gold-backed ETFs witnessed renewed interest in 2021 during equity market corrections but saw a tapering of demand as the year progressed.
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- Goldman Sachs predicts gold prices could reach $4000 per ounce by mid-2026, driven by factors such as fiscal stimulus, lingering trade tensions, and the continued attractiveness of gold as a safe-haven asset.
- In March, the cost of gold hit a record high of $3509.9, fueled by mounting uncertainty around U.S. politics and currency, as investors sought safety from the volatile markets.
- The dismissal of Jerome Powell as Federal Reserve Chair in April 2021, allegedly due to attacks by former President Trump, triggered a decline in the dollar, making gold less expensive for foreign buyers and contributing to its increase in value.
- The finance sector, including real-estate investors and global central banks, has shown renewed interest in gold, with central banks increasing their gold reserves following the 2020 pandemic and gold-backed ETFs seeing increased demand during market corrections in 2021.
