Many factors support the price of gold. Most of them are ever-present, constants that drive nations and investors to gradually accumulate more of the precious metal. Consider the following bullish reasons to own gold and ask yourself if these concerns are likely to disappear:
- Geopolitical turmoil
- The risk of war
- Investors’ search for safety and security
- Investors’ need for diversification
- Sovereign nations’ efforts to build financial credibility and stability
- The growing U.S. federal debt
- Fiat currency risk
- U.S. dollar debasement
- Risk to U.S. dollar-dominance
- De-dollarization: the desire of foreign nations, especially those whose relations with the U.S. have deteriorated, to reduce their exposure to U.S. financial assets.
All of these factors have played a growing role in the rise of gold since late 2023, and it is hard to foresee them changing. Is peace about to break out across the globe? Do central banks want to hold less gold in their financial reserves? Will the United States balance its federal budget and reduce its massive debt load? Will investors ever eliminate their need for security and diversification?
Over the short-term, the only true questions influencing gold prices are how much do these factors weigh on investors’ minds, and when does it seem that prices may have gotten a little ahead of themselves? In the long run, however, these issues weigh as an ever-present cloud above investors, a strong argument to continue accumulating and holding gold as a safe haven asset.
