Hope for falling interest rates: gold price rises to new record high

Hope for falling interest rates
Gold price rises to new record high

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Inflation has recently fallen faster than expected. The central banks could therefore lower key interest rates again sooner. This gives the gold price a boost. The central banks also support it in other ways.

The gold price continued its record hunt at the beginning of April. At times it rose to a high of $2,262.19 per ounce. “The US inflation figures from last Friday, which were slightly below expectations, support the prospects of an interest rate cut by the Fed in the middle of the year,” said UBS analyst Giovanni Staunovo, explaining the price increase.

When key interest rates are high, market participants are more likely to invest in safe but interest-bearing investments instead of buying gold, on which there is no interest. Approaching interest rate cuts, demand for safe-haven assets amid political uncertainty and purchases by central banks have already pushed gold prices up more than eight percent this year.

Gold prices have also reached record highs in other currencies such as the euro, Chinese yuan, Japanese yen, Indian rupee and British pound. The European Central Bank (ECB) is also heading towards interest rate cuts in view of falling inflation. “Europe could lower interest rates earlier than the USA,” the governor of the Austrian National Bank told the “Kronen Zeitung” in an interview published on Saturday. “The economy is growing more slowly in Europe than in the USA. This could mean that price developments here will weaken more.”

In addition to hopes of falling interest rates, gold purchases by central banks around the world have also been supporting the price of gold for some time. According to the industry association World Gold Council, central banks bought almost 1,040 tons of gold on the market last year. “An important price driver remains central bank purchases, which increased significantly after the outbreak of war between Russia and Ukraine and the freezing of Russian assets in the West,” said a recent analysis by Dekabank.

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