HOW WILL THE NEW CENTRAL BANK POLICY AFFECT GOLD PRICES?

Yesterday, the latest report by In Gold We Trust was published. In this 200-page publication, the authors analyzed in detail all the factors that, in their opinion, currently have the greatest impact on the price of gold. Below is a brief summary of three groundbreaking changes that will drive the price of gold in the near future.

1. Change in monetary policy

After many years of quantitative easing (QE), central banks have slowly begun to change their policies. Although this shift has gone unnoticed by most of the media, its effects will undoubtedly be felt in many areas of the economy.

The enormous amount of money that has entered circulation over the past decade has led to record high stock valuations and low interest rates. This year, this process has finally begun to be halted. Instead of buying more securities, banks have opted to sell them off intensively. The first steps toward quantitative tightening (QT) were taken in the US. European banks followed in the footsteps of the Federal Reserve. What does this mean for the gold market?

There are many indications that the era of low volatility in financial markets is coming to an end. A halt in the flow of money could significantly increase the risk level of stock market investments. Investors accustomed to security and steady returns should prepare for a change in the rules of the game. Added to this is the risk of a speculative bubble bursting. The new conditions are likely to increase interest in accumulating gold, which is a safe haven for investors.

2. Change in the global monetary order

For several years now, experts have been pointing to the gradual process of the dollar losing its status as an international currency, a phenomenon known as de-dollarization. Russia and China are the initiators of this move away from the US currency in favor of national currencies.

The current monetary order can be described as unipolar. The US dollar plays a dominant role in it, performing two essential functions in international relations: as a reserve currency and as the primary means of payment.

The dollar's loss of its status as the world's most important currency could have far-reaching consequences for the United States. A decline in global demand for US currency and Treasury bonds could contribute to an increase in domestic inflation and interest rates in the US. And as everyone who follows the gold market knows, a weakening dollar is almost always accompanied by a rise in the price of gold.

But that's not all. The dethronement of the dollar will increase demand for its substitutes, which include gold. This is confirmed by the actions of countries such as Russia, China, and Turkey, which are regularly expanding their gold reserves.

3. Technological breakthrough

Technological progress has reached a staggering pace. More and more financial transactions are being carried out using smartphones. In turn, the invention of cryptocurrencies has accelerated the process of digitizing money.

According to the authors of the report, neither of these phenomena poses a threat to the gold market. On the contrary, the report suggests that gold and virtual money are actually allies, and that it is only a matter of time before gold-based cryptocurrencies emerge.