What is the current status of the gold market and the factors affecting a jump in prices? Exness specialist Michael Stark The main factors aren’t really technical, they’re actually almost entirely fundamental. With most major central banks having cut rates to zero or nearly zero, the traditional factor against buying gold, meaning that it doesn’t pay interest to holders, is negated. While there’s no evidence yet that record low rates and record high quantitative easing (QE) in most major economies are causing a significant uptick in inflation, traditionally you’d expect to see inflation increase in such an environment. This makes people want to buy gold as a hedge against lower purchasing power of their savings. Furthermore, the new money created by QE in March and April initially went only into shares, but since May it has been clear that other markets like gold and crypto are also receiving inflows of fresh liquidity. The other important factor apart from monetary (and, to a lesser extent, fiscal) policy is the dollar’s loss of strength over the last few months. There are a range of factors behind this, including both overvaluation for a long time and the generally disorganised governmental response to COVID-19 in the United States, but the practical result is that gold is cheaper for holders of most currencies since the metal is usually priced in dollars. The final key consideration which I think is often overlooked is production. Both the pandemic itself and its resultant economic effects have been enormously disruptive in various emerging economies which produce and export significant amounts of gold. South Africa is maybe the most prominent example. Unless the current high demand starts to sink as a result of high prices, we can probably expect focus on supply issues to increase over the next few months. Some investors have rushed to buy gold with the hope of making a profit but also prepared to suffer a loss. Do you think …
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