In recent years, the price of gold has climbed steadily. Aside from the current market blip (see chart below), an upward trend has been going for years. Since 2020, the price of gold has risen from $1,585 per ounce to more than $4,500 per ounce.
Money should not lose value through inflation. Ideally, it should grow on its own because of interest. But such investments are looking less promising right now, as central bank interest rates are relatively low. As a result, investors seek a safe place to park their wealth — and precious metals are one option they turn to. Increased demand naturally pushes up prices.
Economists at Deutsche Bank have shown that central banks around the world are increasingly buying gold. In a study published on April 27, they found that China, Russia, India and Turkey, as well as central banks in emerging markets, are increasing their gold reserves. As a result, gold could reach $8,000 per ounce by 2031 — twice its current price.
A new player: cryptocurrencies
Before predicting the future, it is worth stopping to ask what is behind the current gold rally. Frank Schallenberger of Landesbank Baden-Württemberg (LBBW) cites "expectations of interest rate cuts and a weaker US dollar, strong purchases by central banks, as well as high demand for coins and bars" as key factors behind soaring gold prices.
