Key takeaways
- Gold prices hit their highest level since May as investors flock to the “safe haven.”
- The turmoil on cryptocurrency exchanges is pushing investors towards gold.
- Despite recent signs that the Federal Reserve may be done raising interest rates, investor confidence wavered with the release of the minutes of the latest meeting, making gold more attractive.
The turmoil in the ever-volatile world of cryptocurrencies may be pushing some investors to abandon “digital gold” for real gold.
The price of gold surpassed the $2,000 per ounce mark on Tuesday afternoon, according to prices tracked by online precious metals retailer JM Bullion. At its high of $2,007.25, it was the highest price since May.
Warning signs of faltering consumer spending of the morning's retail earnings reports, and criminal charges against a prominent figure in the cryptocurrency business helped increase interest in gold, which is often considered a "safe haven" asset, Collin said Plume, CEO of Noble Gold, a prized metals investment company.
“There is some pessimism in the cryptocurrency market and industry today,” Plume said in an email. "As always, investors are flocking to the only asset they can count on: gold."
Bitcoin prices fell on Tuesday after Changpeng Zhao, founder of Binance, the world's largest cryptocurrency exchange, pleaded guilty to federal charges of money laundering, in an agreement that involved the company paying $4.3 billion in fines.
The price of gold has also been supported lately by uncertainty in markets over whether the Federal Reserve would raise its benchmark interest rate again to combat inflation, said Joe Cavatoni, chief market strategist at the World Gold Council. This has prompted central banks around the world to buy gold, with the third quarter of 2023 seeing the second-largest gold purchase on record in any third quarter, according to council data.
"Throughout 2023, we have seen the price of gold supported by global demand, particularly from central banks, due to gold's safe haven status, as markets awaited more clarity on the direction interest rates are likely to take. in 2024," Cavatoni said in an email.
Last week, traders had completely discarded the idea of another Fed rate hike, with the odds of one in the coming months valued at zero percent, according to CME Group's FedWatch tool, which forecasts rate hikes based on Fed futures trading data .
The probability of a rate hike at the next Federal Reserve meeting in December rebounded to 5% on Tuesday afternoon, as markets digested the just-released minutes from the last Federal Reserve meeting in November.
The minutes showed that Federal Reserve officials believe monetary policy may need to remain tight to reduce inflation. However, data released since the last meeting has shown that interest rates are having the desired effect on the economy.
