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Investors choose gold as a hedge against financial instability

China’s real estate crisis continues, with the yuan losing almost 6% of its value against the US dollar this year. On the other hand, gold has become the preferred investment alternative, acting as a hedge against financial fluctuations. According to Bloomberg, gold prices in China have risen sharply recently, reaching a historic relative high price compared to gold prices in New York, London.

 

Hedge against financial instability

 

Gold remains a highly sought-after investment alternative that acts as a hedge against financial instability. Physical gold has proven its strength even in the face of a very strong US dollar and several years of high yields. When the Fed starts to cut interest rates and the US dollar cools, it will be time for gold to shine, as has already happened in countries such as Argentina, Japan, China, South Africa and others, writes Forbes. Analysts predict that demand for gold will remain strong in the future, also due to falling share yields. Last but not least, buying gold as a good investment move is proving its worth, with sales of gold bars and coins up 30% compared to last year.

 

 

Not only investors, China continues to increase its gold reserves. World gold reserves peaked in June at 38,764 metric tonnes, breaking the record set in 1965 by 400 tonnes. According to the latest data from the World Gold Council (WGC), Poland increased its reserves the most, followed by China, the Czech Republic, Russia and Singapore.

 

Croatia bought 1,9 tonnes of gold

 

Gold is an important part of central banks’ reserves because of its safety, liquidity and profitability, key investment objectives of central banks. They hold around one fifth of all gold mined in history. We present the latest WGC international financial data on gold reserves, published on 4 October. Slovenia is 89th on the list of 100 countries with 3.2 tonnes of gold reserves. According to the WGC, Croatia bought 1.9 tonnes of gold in December 2022 as part of the ECB’s requirements for the country’s accession to the euro area, and then sold them in January 2023.

 

USA8.133,5 tonnes
Germany3.352,6 tonnes
IMF2.814 tonnes
Italy2.451,8 tonnes
France2.436,9 tonnes
Russia2.332,7 tonnes
China2.165,4 tonnes
Switzerland1.040 tonnes
Japan846 tonnes
India799,6 tonnes

 

The year 2023 started with the gold price at USD 1,830.10, and it is trading similarly these days. The Fed continues its aggressive policy, and continues to influence the gold price. The forecast gold price at the end of 2023 is USD 1,985, a year-on-year change of +8%. In the first half of 2024, analysts estimate that the gold price will climb above USD 2,000. Currently, the gold price is at its lowest level in half a year, making it an excellent buying opportunity.

 

Source: Bloomberg, Forbes, World Gold Council

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