by Sebastian Wieschowski

The price of gold keeps rising and rising - following the recent interest rate decision by the Fed, gold has reached a fresh all-time high of around $2,220 US dollars. And apparently, the end of the road is far from reached: According to experts, gold could continue to rise in the second half of 2024, with forecasts indicating an increase to up to $2,300 USD per ounce.

This rise is primarily supported by central banks purchasing gold in record amounts, further strengthening interest in the precious metal. An important dynamic influencing the gold market is also the inverse relationship between gold prices and interest rates. Decreasing interest rates make gold more attractive compared to fixed-income investments such as bonds, as they would yield weaker returns in a low interest rate environment. The recent $100 price increase is primarily attributed to significant futures purchases. Central banks, especially China, have been buying historic amounts of gold in recent years and continue this trend in 2024, further supporting prices.

The physical demand for gold is heightened by its role as a safe haven in times of geopolitical uncertainty. China remains the largest buyer for both consumers and central banks. Additionally, countries like Poland and Singapore have also made considerable gold purchases, partly due to the ongoing crisis between Russia and Ukraine.

In addition to institutional purchases, strong retail demand for gold jewelry, bars, and coins also contributes to the price increase. China and India are the leading markets worldwide in this regard. Although the increased prices may potentially impact jewelry consumption, demand for investment in gold bars and coins remains robust in India.

In Turkey, the demand for gold has increased due to high inflation, limited alternative investments, and political uncertainties. Investors in Turkey have used gold as a hedge against the volatility of the Turkish lira during last year's presidential elections. The Turkish central bank has also increased gold purchases as inflation in the country has risen to worrying levels and the national currency has lost significant value against the US dollar.

So, there is a long list of reasons for rising gold prices - the recent interest rate decision by the Fed seems to have less impact. Because in reality, the US monetary authorities have announced nothing new: they want to wait for further data before initiating the interest rate hike. Furthermore, the Fed expects three interest rate hikes this year - this figure has already been priced into the market for some time. Nevertheless, gold and other asset classes like stocks or cryptocurrencies quickly returned to rally mode shortly after the interest rate decision - and gold was the daily winner on March 20, 2024.

On Wall Street, investors reacted positively to the decision of the US central bank to leave the interest rate unchanged but signal three further rate cuts this year. This led to a minor rally, with the Dow Jones index rising by one percent and the Nasdaq gaining 1.3 percent. The S&P 500 also saw an increase of 0.9 percent. The US central bank has decided to keep the interest rate in the range of 5.25 to 5.50 percent but signaled possible cuts totaling 0.75 percentage points throughout the year. Meanwhile, the discussion about inflation data, which were higher than expected in January and February, continues. However, Powell emphasized that these values may be subject to seasonal fluctuations and do not significantly alter the overall picture.

The uncertainty about the further inflation path prompts the Fed to make its decisions from meeting to meeting. And this is precisely where the danger lies for gold and Co. - if the data unexpectedly changes, the Fed could still hit the monetary brakes. And then, not only stocks but particularly gold would suffer. Investors should therefore remain vigilant.

The impact of rising gold prices extends to gold coins, particularly bullion coins made of gold. In Germany, gold coins weighing one ounce are no longer available anonymously in trade, as their value has surpassed the €2,000 mark. Prior to this, individuals could purchase gold anonymously in Germany up to this threshold. This change reflects both the increasing value of gold and the regulatory adjustments made to monitor transactions more closely. As gold continues its upward trajectory, such measures may become more common in other jurisdictions as well, potentially influencing the accessibility and anonymity of gold transactions worldwide.

Sebastian Wieschowski has been collecting coins since childhood and, after working as a journalist with a focus on finance and economy, has switched his focus on coins and precious since 2012. He is the author of several self-published books on Bullion Coins, Panda Coins, Fake Coins and Coin Grading and works for numismatic magazines. He is also a recurring expert on the German television program Münzengalerie (Coin Gallery), the longest running numismatic television show in the world. You can find out more about his work at coinosseur.com