Gold continues to rise due to uncertainty in the markets. This is due to its natural status as a reserve asset, and Citi analysts expect this to continue because of its reserve asset characteristic.
The world has been hit by a century-old global pandemic. Uncertainty has been the concept that guided decisions and inflections in the world. Well, the most affected area has been the world economy.
In this way, investors and traders have modified their way of doing things. And now they are concentrating on investing in what will secure their capital and their money in the long term. That is the role that gold has played so far.
Gold surpasses its ceiling above $ 2,000
The year 2020 has been a great dilemma for everyone. However, the direct reflection of the effects of the global crisis has been seen in the behavior of financial markets.
And also in the investors’ focus on reserve assets, allowing gold to continue to rise.
Even today when financial markets have recovered and are on the rise once again. Most investors around the world know that this boom is essentially due to government aid.
So they seriously doubt their profitability in the long term, and therefore the safety of their capital. This is where the gold comes in. Well now gold continues to rise due to a good performance.
With gold topping the $ 2,000 mark this week. Citi economists have clarified exactly what they think is driving the precious metal’s rise, and what it could tell us.
Gold’s spot price, currently hovering around $ 2,058 per ounce, has risen more than 4% this week and is set for its ninth week of consecutive gains, the longest consecutive weekly increase since 2006.
And it is that, gold is the main asset reserve of value that has existed in the history of humanity. This is thanks to the lack of a solid correlation between the price of gold and the financial markets. Thus, gold continues to rise.
Can it replace the dollar?
The dollar continues with a performance that leaves much to be desired, while gold continues to rise.
Although on Friday, the US currency had a good rhythm of operations in the session, after the publication of the US employment figures, some analysts consider that there is still a long way to go for the dollar to recover.
The recovery in gold was also not an indicator that the dollar would lose its crown as the “main international reserve asset,” Citi analysts explained.
Economists at Citi said that while some have suggested that the rise in gold follows the depreciation of the dollar, “No other currency or country is ready or willing to assume the role of the dollar”.
In fact, the “massive provision” of dollars by the United States Federal Reserve in foreign exchange exchanges with other countries, also known as “lines of exchange”, reinforces its position as the world’s reserve currency.
“Even if the dollar is now worth less in terms of gold, so are all other currencies”they said. Which means your “Exorbitant privilege remains.”
In summary, Citi economists said that the gold recovery was driven by monetary easing from central banks, resulting in negative real returns.
Will this inflection in currencies allow gold to continue to rise?
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