The value of gold has once again reached an all-time high following the announcement from the US Federal Reserve (Fed), stirring up conversation.
According to the announcement made during the Federal Open Market Committee meeting on the 20th (local time), the Fed has kept the interest rate steady at an annual 5.25~5.50%. This marks the fifth consecutive time the Fed has frozen interest rates since last September.
The Fed plans to keep the rates steady until it gains confidence that inflation is moving sustainably towards its target of 2%. The Fed also assessed that the economic outlook remains uncertain and inflation remains high.
The Fed has predicted an end-of-year inflation rate of 2.4%. Looking at the dot plot released by the Fed, the median interest rate for next year is projected at 4.6%, which could be interpreted as a 0.75% point decrease in the benchmark interest rate.
Typically, the Fed adjusts interest rates in 0.25% point increments, which suggests there may be three rate cuts this year. The Fed’s announcement is behind the recent surge in gold prices.
As of the morning of the 21st (local time), the price of gold futures for April delivery on the New York Mercantile Exchange (COMEX) was trading at over $2,205 per ounce, reflecting a rise of more than 2% from the previous day.
Spot gold reached $2,220 per ounce during trading the day before the March Federal Open Market Committee (FOMC) meeting. Gold has been strong recently, repeatedly setting record highs.
Experts believe this trend will continue for some time, and Poland is a significant reason behind this.
According to foreign media, including Reuters, central banks continue to buy gold despite the ongoing environment of high-interest rates and a strong dollar.
A central bank representative stated, “Central banks have been buying gold at historic levels over the past two years, and this trend is expected to continue.”
China has maintained its position as the top consumer of gold, both in terms of consumer demand and purchases by the central bank.
The belief is that China will continue this trend, especially given the current weak economic situation and instability in the real estate sector, which has increased the importance of asset stability.
As such, the demand for gold, a safe asset, is expected to increase universally. In the past, gold buying was mainly centered in Russia and China, but recently, it has diversified, with various countries worldwide buying gold.
According to local reports, Poland purchased about 287,000 lbs of gold in 2023, making it the second-largest gold consumer in the world.
This is believed to be due to Poland’s geographic proximity to Russia and Ukraine, which are at war. As a result, demand for safe assets has increased.
Geopolitically, the demand for gold, a well-known safe asset, has also increased as uncertainty increases.
As Poland has become a leading player in market diversification, the overall price of gold is expected to rise as the volume of gold trading increases.
Industry insiders believe that the ongoing conflict between the US and China will decrease dollar dependence and continue to drive gold purchases by various countries.
The People’s Bank of China, Finland, Singapore, and the Czech Republic are expected to continue actively buying gold.
The World Gold Council reported that central banks purchased 2,383,000 lbs of gold in 2022 and 2,285,000 lbs in 2023 and are expected to continue actively buying gold this year.
Meanwhile, South Korea has reportedly not purchased additional gold since 2013.
As a result, South Korea’s ranking of gold holdings has fallen four places from 32nd to 36th over the last decade.
According to a report released by the World Gold Council, the Bank of Korea currently holds about 230,000 lbs of gold, which accounts for about 1.7% of its total foreign exchange reserves.
Most Commented