Here's why gold prices are at a 10-month high

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  • Gold prices have reached their highest level since April last year, touching $1,346 per ounce on February 20th.
  • This has largely been driven by higher demand in response to concerns over a slowdown in global growth.
  • Gold is is considered a safe haven asset, meaning that it is a low risk investment during periods of uncertainty.

Gold prices have reached their highest level since April last year, touching $1,346 per ounce on February 20th.

This has largely been driven by higher demand. According to the World Gold Council, January 2019 marked the fourth consecutive month wherein inflows to gold-backed exchange traded funds (ETFs) outweighed outflows.

The price of gold is heavily influenced by predictions of global growth. The rise in prices of gold - which is considered a safe haven asset, meaning that it is a low risk investment during periods of uncertainty - has been precipitated by a mix of global headwinds.

These include the ongoing trade tensions between the US and China, the prospects of a no-deal Brexit and most importantly, the possible weakening of the US dollar as the Federal Reserve adopts a looser, accommodating monetary policy in light of a slowdown in the US economy.

If the US central bank continues with a pause on rate hikes, it will cause foreign investors to reroute their capital to investments that offer better returns.

In combination with an economic slowdown in the EU and China and a dip in trade volumes, these factors portend a slowdown in global economic growth.

As a result of persistent market uncertainty, institutional investors will continue to divert their funds towards gold, further raising prices. Societe Generale, a French investment bank, has maintained a bullish forecast on gold this year, explaining that the commodity will “break free” owing to a lack of other safe haven assets.


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