It is supposed to act as a safety net when markets are in decline, since the price of gold does not usually move with market prices. For this reason, it can also be considered a risky investment, since history has shown that the price of gold does not always rise, especially when the markets are rising. Of all the metals on Earth, gold shines the brightest when it comes to maintaining its value and being a vehicle for building and preserving wealth. In fact, the price of gold has risen more than 400 percent compared to 20 years ago.
Lundin pointed to patterns on technical charts that show bullish signs of an imminent long-term rise in the price of gold. India's demand for gold usually peaks between October and December, due to Diwali, the festival of lights, followed by thousands of weddings. Gold is expected to reach approximately the long-term rate of inflation, according to Charlie Fitzgerald, certified financial planner at Moisand Fitzgerald Tamayo in Orlando, Florida. The dollar is likely to drive up the price of gold due to increased demand (because you can buy more gold when the dollar is weaker).
In addition, high inflation is eroding the purchasing power of each dollar, encouraging investment in a tangible asset such as gold and other hard assets. Nowadays, gold is sought, not only for investment purposes and to make jewelry, but it is also used in the manufacture of certain electronic and medical devices. However, gold closed the first half of the year around the same price at which it began, backed by multi-decade highs in inflation and continuing geopolitical uncertainty. Gold prices reached multi-year highs in the early days of the Covid-19 pandemic, for example, as cases spread internationally and the stock market sank.
The dollar and the desire to keep gold as a hedge against inflation and currency devaluation help boost the price of the precious metal. As a result, it's important for investors to consider the overall macroeconomic and geopolitical environment when analyzing gold. People usually dedicate their purchases of gold during Diwali to deities, especially to Lakshmi, the goddess of wealth. Similarly, with fear and uncertainty at an all-time high during the COVID-19 pandemic, gold-backed exchange-traded funds recorded unprecedented inflows and the price of gold reached an all-time high.
Traditionally, gold has been considered a safe haven asset, and many investors turn to the yellow metal during recessions and times of upheaval. Rate hikes are generally negative for gold because when rates are higher, interest-bearing investment products are more profitable than the precious metal. The price of gold is generally inversely related to the value of the United States dollar because the metal is denominated in dollars.