![Representative Image](https://worldnewsn.s3.amazonaws.com/media/images/16gold_july20.jpg)
Political turmoil 'heats up' world gold prices
Jul 20, 2024
Washington [US], July 20: As of yesterday (July 19), the world gold price has dropped to approximately 2,400 USD/ounce, which is considered to have cooled down significantly compared to a few days ago - when it reached an all-time high of about 2,480 USD/ounce. However, that does not mean that the upward trend of gold prices will reverse.
The Last Straw and the Root Cause
The recent increase in gold prices on the world market is believed to have originated from the US Federal Reserve (Fed) reducing the basic interest rate. The Fed's reduction is not only to lower the value of the USD but also to show that inflation is under control.
However, that was just the "last straw" that caused gold prices to reach a record high. In terms of supply and demand alone, China and India's large gold purchases in recent times have become important factors causing gold prices to rise. According to Reuters citing data from the World Gold Council, the People's Bank of China (PBOC) alone bought up to 7.23 million ounces in 2023. This is China's highest purchase in the past 46 years. Although it no longer buys as much as before May 2024, China continues to buy gold at a high level. The important reason for China's gold purchases is because of tensions between the country and the US. To prevent risks, especially from the fact that Russia's assets were frozen after launching a military campaign against Ukraine, Beijing needs to reduce its dependence on the USD.
In addition, the war situation in Ukraine and the Middle East has increased world instability, so the trend of "taking refuge" in gold has increased. Along with that, the trend of avoiding dependence on the USD is also the reason why gold has become an important factor in the "reserve basket" of countries. Especially with the emerging economies of BRICS (including Brazil, Russia, India, China and South Africa), there is a tendency to increase trade in each other's currencies, thereby reducing dependence on the USD. That also makes gold a choice in the national "reserve basket".
In addition, based on past data, gold tends to increase in price during the period near the US presidential election.
Source: Thanh Nien Newspaper