A recession would favor gold prices, but the sharp rise in interest rates used to deal with inflation has so far limited the rise of the precious metal. The global situation is expected to become even more tense and could be another possible obstacle for gold, which is considered a safe investment asset in times of uncertainty. In the years when inflation exceeded 3%, the price of gold rose by 14% on average, and in periods when the US CPI averaged more than 5% year-on-year (currently around 8%), gold averaged almost 25%. The price of gold initially rebounded as the war in Ukraine unfolded and investors sought high-quality liquid hedges amid growing geopolitical uncertainty.
For those looking to set up a Gold IRA, now may be the perfect time to do so. The price is in the consolidation zone, near the fifth final level, whose lower limit coincides with Area 2 of the global trend. Most novice gold investors believe that if inflation rises in the U.S. In the US, the price of gold should also rise, as more dollars of inflation will have to be paid per ounce. Late and emotional decisions to buy and sell goods and assets, including gold and currencies, can result in financial losses.
The XAU price is currently consolidating in the area of dynamic development, which may indicate that the development stages of the trend shifted one stage upwards. The price of gold didn't change much in August; however, there was a significant drop from August 6 to 9, due to strong employment data in the US. UU. At the time of writing this article, experts have a positive outlook on the price of gold in the near future and do not expect the precious metal to go down.
For example, to combat the recession of the early 2000s, the Federal Reserve reduced interest rates to very low levels, forcing long-term investors to withdraw from low-yield bonds and to diversify their portfolios with gold. However, gold returned some of those initial gains, as investors shifted their focus to monetary policy and rising bond yields. Coronavirus aid packages and periods of economic recovery caused the price of gold to decline, while rising inflation, the spread of the pandemic and geopolitical tensions made investments in gold much more attractive. The chart above shows the range of XAU/USD price fluctuations for each month based on the realistic gold forecast I made.
By way of example, it is shown below that China and India (with strong economic growth) have become the main buyers of gold over the past two decades to invest and create reserves and, therefore, have given additional encouragement to price increases. The Group of 7 has recently decided to ban the purchase of newly minted and refined gold in Russia, in the latest move by the United States, Great Britain and their allies to increase sanctions on Russia in response to its invasion of Ukraine.