In recent months, the world has seen a surge in the prices of gold and silver.
The prices for gold fell to $1620 and then soared to $1980 per ounce in the last three months, while the price of silver changed from $18.40 to $23 per ounce over the same period. There are several reasons for these fluctuations in the market.
Firstly, the ongoing race in interest rates of the European Central Bank (ECB) and the US Federal Reserve against the backdrop of persistent inflationary problems in Europe and the United States.
Secondly, there is the increase in geopolitical and military tension worldwide. Traditionally, such situations play in favor of increasing the quotes of gold and, to some extent, silver.
Thirdly, changes in the structure of demand for gold and silver in China, India, and other countries that are the main consumers of these metals for the jewelry industry. Fourthly, the increased interest in gold jewelry in the Arab countries, which have significantly increased their income against the backdrop of a global rise in energy prices.
Fifthly, the increase in reserves in gold by the central banks of most countries of the world against the background of the growing threat of a global recession, combined with significant volatility in the stock and currency markets.
Fluctuations in global gold and silver markets
Over the past few months, the global gold and silver markets have experienced significant fluctuations in prices, and the factors that influence this can be identified. One of the primary reasons is the race in interest rates between the ECB and the US Federal Reserve, which has led to persistent inflationary problems in Europe and the United States. The effectiveness of the measures taken by the US Federal Reserve has been better, and this has resulted in a decline in inflation in the US, while Europe continues to face alarming price dynamics. This has prompted regulators to increase rates, which has a negative impact on the gold and silver markets as investors move their resources into instruments with higher yields.
The impact of geopolitical tensions on the fluctuations of the global gold and silver markets
Geopolitical and military tensions in the world also have an impact on the gold and silver markets, and these typically increase demand for these precious metals. Conservative investors tend to invest in gold during times of global unrest, and the industrial consumption of gold and silver also increases during periods of active arms race, further driving up the demand and prices.
Changes in the structure of demand for gold and silver in countries like China and India have also played a role in the fluctuations in prices. With the gradual restoration of the solvency of citizens in these countries, demand for gold and silver jewelry has grown, with the richer population preferring gold, and the less wealthy choosing silver. This increase in demand has been a significant support for the trend towards a gradual rise in the prices of precious metals with an investment horizon of 3-5 years.
Increase in gold reserves of central banks around the world
Central banks around the world have also been increasing their reserves in gold, which they see as a kind of liquidity safety cushion in the rapidly changing financial world. This has also been due to changes in bank capital requirements and regulators’ diversification of their assets.
On the other hand, for the population, the main factors when choosing investments in gold or silver are two factors: the amount of financial opportunities of specific citizens and aesthetics. As a result, private investors more often choose cheaper and more interesting silver jewelry, which is leading to a new trend in the jewelry industry, with a product that combines diamonds and silver or a combination of silver and gold components in one piece of jewelry.
In addition to these objective economic reasons, the precious metals market is also affected by the “black” and “gray” market of precious metals. Recently, many European countries and the United States have imposed a ban on the import of Russian gold as a sanction for the Russian invasion of Ukraine. This has resulted in a significant impact on the precious metals market.
the forecast of gold and silver prices in the first six months of 2023
Looking ahead, the forecast of gold and silver prices in the first six months of 2023 is the continuation of the fluctuation of gold prices. The main jumps in gold prices are expected to occur during periods of peak tensions in the Russian war against Ukraine, events around Taiwan, and increased problems in relations between NATO-Russia, the US-China, the US-Iran, and the US-Russia. With the high volatility of gold prices, when its quotes sink to the “bottom” levels, central banks of the developed countries of the world will actively replenish their gold reserves, providing additional support for gold on the world market. Russia’s attempts to sell its bullion on world markets through third countries, bypassing sanctions, will play against a very significant increase in gold prices.
In conclusion
The factors that influence the fluctuations in the global gold and silver markets are numerous, and investors must keep a close eye on geopolitical and economic events to make the most of these markets. While the future remains uncertain, the demand for these precious metals is expected to remain high, especially in countries like China and India, which will likely result in the continued growth of prices over the long term.
