4 factors push gold to shine for the second month in a row
A recent report from the “Equity Group” company said that gold prices succeeded in shining globally, due to their rise for the second month in a row, recording a growth of 11% during the months of April and May 2021, referring these recent rises to 4 main factors, indicating that time is still It is appropriate to invest in the yellow metal, coinciding with the continuation of the US central bank "the Federal Reserve" to provide incentives to promote economic recovery, and some investors' feeling concerned about the rise in inflation and the high levels of evaluation of the stock market.
The Equity Group report, which was devoted to the "Vision", indicated that gold prices rose during the month of May only by about 7% to settle at the highest levels, about 1900 dollars per ounce, and to reach this level for the first time in 5 months.
In turn, the head of the research department at Equity Group, Raed Khader, stressed that for investors, gold is a store of value when stocks collapse or the economy collapses.
He indicated that if fears of economic instability persist, gold prices may be on their way to rise.
He pointed out that it is not easy, amid the strong fluctuations in global markets affected by the pandemic, for gold to witness strong rises and to approach the $2000 barrier again.
He explained that gold prices for the tenth time since July 2020 exceeded the levels of 1900 dollars per ounce, and soon returned to decline again.
The report indicated that the recent rises in gold are due to four factors, at the forefront of which are fears of high inflation, as due to the strong expansionary policies that governments and central banks around the world resorted to in an attempt to address the risks arising from the outbreak of the Covid-19 pandemic, inflation witnessed strong rises.
He stressed that with the increase in inflation fears, investors tend to resort to gold because it is considered a good hedge against price hikes, especially.
He pointed out that most central banks ruled out any steps to ease expansionary policies in the coming period, especially the US Federal Reserve, which mainly caused gold to rise during the last period.
According to the report, the second reason is the decline of the US dollar, as gold and the dollar tend to have an inverse relationship, which means that their prices are moving in different directions, explaining that for this reason, gold can be considered a way to hedge against the dollar.
He pointed out that with the US Federal Reserve excluding any possibility of raising interest rates in the coming period and the continuation of the government of President Joe Biden to move forward with the unprecedented huge stimulus packages, the US dollar witnessed a noticeable decline against most of the major currencies, and weakness is likely to continue to dominate it as long as the situation stabilizes as well. It is, therefore, a weak dollar usually supports gold and vice versa.
The report explained that the return of demand for gold by China and India is the third reason, stressing that the demand for gold has returned to rise again in India and China, especially with the continued improvement of economic data in the second largest global economy, which showed the recovery of domestic demand and demand for exports and the return of the decline in the number of infected people. In India again.
As for the last reason for these rises, the report mentioned that the central banks’ reserves of gold increased, as recent statistics showed that central banks increased their reserves of gold during the first quarter of 2021, and the World Gold Council confirmed that global central banks’ trading recorded a net purchase in February of 11.2 tons, and India topped in the lead.