2023-05-27 16:08:18
gold prices
The rise in the dollar and US Treasury bond yields, along with the US debt ceiling crisis, continues to curb the upward trend in gold prices, which are moving in a narrow range near $1950 an ounce, following it was at $2000 in the middle of this month. But the most important question that experts and investors are discussing is whether Gold will return once more above the level of $2000 an ounce, and is the current time suitable for buying, or waiting for further decline in prices?
At the end of trading on Friday, gold futures rose by a slight rate of 60 cents to $ 1944.30 an ounce, while recording weekly losses of regarding 1.9 percent, the third in a row.
Economists assure the “Sky News Arabia Economy” website that the summer will be hot for gold, whose trading will remain occasional in many times, but they point out at the same time that reaching $2,000 an ounce once more will not be difficult.
Facts and figures
But first, it is necessary to know an important fact, which is that gold is still up by regarding 7 percent in 2023, and regarding 5 percent in a full year, despite losing more than 2.2 percent in a whole month, and that the average annual performance of gold reached 9.2 percent as a return in gold priced in dollars. From 2006 until last year, these returns are considered excellent by all investment standards, according to Mazen Salhab, chief market strategist at BDSwiss MENA.
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Why did gold decline so strongly in the last month?
In answering the important question, will gold return once more above the level of 2000 dollars per ounce, Salhab says in his interview with “Sky News Arabia Economy”: “Before answering this question, a more important question must be answered .. Why did gold even decline strongly in the last month? And the answer is It lies in America first and foremost. The answer takes us to the rise in the American personal consumption expenditures index by 4.7 percent annually, and this means that US inflation continues, and therefore interest will not decline quickly, on the contrary, it may rise in the next month’s meeting. (3, 6, 12 months) on US Treasury bonds, which reached higher than 5.2 percent, and thus it has become higher than current US inflation (inflation at approximately 4.9 percent), meaning that the returns have become positive, and this is the death of gold, as it is said.
And the chief market strategist at BDSwiss MENA adds: “The last point is that raising interest, which makes lending costs high and liquidity declining, may prompt major investors and even central banks to partially sell gold to obtain easy and quick liquidity, especially following the strong purchase in the first quarter of 2023, and we should not be surprised by such operations, because the liquefaction of gold is possible and quickly in markets with high liquidity, such as gold, without resorting to traditional markets.
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Gold will not lose its gains in 2023
“Therefore, it can be said that it will be a hot summer for gold, whose trading will remain occasional in many times, but reaching once more $ 2,000 an ounce will not be difficult (only 2.8 percent) because even if it declines more, the markets read a rate cut later this year.” According to Salhab, who confirmed that gold will not decline strongly and lose all its gains in 2023 except in one case, which is that inflation declines faster than the rise in interest rates (inflation is weaker and interest remains high), and this is not happening now because inflation does not decline quickly.
Salhab believes that the completion of the interest-raising cycle is nearing the end by economic and historical standards, and therefore caution is now not to overestimate the speed of the US economy’s decline, which may not happen as quickly as many bet.
What is the right time to buy gold?
As for the right time to buy gold, this depends mainly, according to the chief market strategist at BDSwiss MENA, “on each person, his investment goal, and the return he wants, as we still see that real gold has a good value (Tangible real assets), especially in economies whose local currency is declining. And it loses its value quickly, such as Egypt, Syria, Iraq, Turkey, Lebanon, and others. As for the UAE, which enjoys a strong, stable currency and excellent purchasing power, it is possible to resort to diversifying investment between real gold and gold investment funds, as well as shares of companies operating in the gold mining sector, and these usually give distributions and are for medium and long-term investment. term.”
Salhab concludes that gold remains a good option and should be part of investors’ portfolios in general, because investing in this way will spare investors, especially individuals, the trouble of thinking regarding the daily price of gold, which is often useless.
For his part, Tariq Al-Rifai, CEO of the “Quorum Center for Strategic Studies” in London, says in his interview with the Sky News Arabia economy website: “Gold can be bought at any time because the investment period in gold must be long-term, and from here it is described as a safe haven. But when following gold prices during a year, the price of gold usually decreases during the summer period, as following the price of an ounce reached 2060 dollars, it has now decreased to 1946 dollars, and we can see the continuation of the decline in prices to regarding 1800 dollars per ounce, as we noticed investors are selling due to the pressure of the crisis US debt ceiling.
However, Al-Rifai expects gold prices to witness a record high in the near future, specifically at the end of the current year 2023.
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