Why Gold is Still a Good Investment in 2023

 

Gold Prices Soar as Investors Seek Safe Haven

                Throughout human history, gold has retained its status as a precious commodity and an asset highly sought after by investors. It serves as a safeguard against inflation and economic instability. Deeply ingrained within many cultures, gold holds immense significance, often adorning rituals like weddings and celebrations.

                Recently, the resounding buzz surrounding gold prices in the world has ignited debates among analysts and investors, prompting a comprehensive exploration of the underlying forces at play.

                Numerous factors contribute to the escalating gold prices in the world. Among these, the rising value of gold as a security investment stands out as a primary catalyst. Driven by economic uncertainties and high inflation rates, investors have displayed hesitance towards traditional securities such as stocks. The revered status of gold as a safe-haven asset has spurred a surge in demand, consequently exerting upward pressure on its prices.

                From the then all-time high of $2,075 per ounce in August 2020, it has surged to $2,070 last week.

                The multifaceted reasons behind the heightened gold rates in the world encompass a range of factors. Notably, recent political and economic disturbances hold significant sway. The ongoing war in Ukraine, coupled with rising inflation and interest rates in the US, has created an atmosphere of uncertainty.

                Additionally, the depreciation of the US dollar against other major currencies has also contributed to the rising gold prices. The cost of imported goods surges as the dollar weakens, and gold is priced in US dollars, so when the dollar weakens, it takes more of other currencies to buy the same amount of gold.

                The turmoil in gold prices has cast its shadow over the global jewellery industry. Production has dwindled due to challenges in sourcing raw materials at elevated gold prices. This, coupled with rising unemployment and financial distress, presents a formidable challenge for jewellers.

                According to a jeweller, the market dynamic has shifted noticeably compared to the previous year. Only about 30 per cent of individuals approaching his shop are doing so intending to buy. In contrast, the majority of his customers opt to sell gold jewellery.

                Regular customers who once purchased around 10 ounces of gold are now opting for two to three ounces instead — the jewellery now made has reduced weight with larger dimensions to appear more substantial on its wearers.

                Those purchasing gold increasingly gravitate towards smaller items like nose pins and ear studs, reflecting a trend towards more affordable investments. This shift contrasts with the tradition of buying larger quantities of gold. As a response to these market dynamics, regular customers who once purchased around 10 ounces of gold are now opting for two to three ounces.

                Notably, these customers are requesting jewellery with reduced weight but larger dimensions so that it appears more substantial on its wearers. This reflects a larger trend wherein around 70% of customers are engaging in selling gold, while the remaining 30% are buyers. The buyers’ focus has shifted towards saving money, along with an increased interest in purchasing gold coins. Currently, a one-ounce 24K gold coin is priced at approximately $1,860. This distinctive market trend indicates that customers are investing in one-ounce or 21-karat gold pieces.

                In conclusion, the mounting gold prices in the world can be attributed to a constellation of factors, encompassing heightened demand for safe-haven assets, global economic turbulence, and the depreciation of the US dollar.

                To ensure the global economic trajectory remains on course, governments and central banks must undertake proactive measures to stabilise the economy and address the fundamental factors underpinning the surge in gold prices.