Gold has long been considered a safe haven for peoples and governments, as the countries of the world used in commercial transactions, including the standard of gold, silver and bronze coins so that these currencies carry their real value, or paper to secure a cover of gold according to their value, all this was before the "Bretton Woods" system in 1944, when the "Bretton Woods" system imposed the dominance of the US dollar gold on the reserves of the world central banks, which imposed on each member state to determine the exchange value of its national currency for gold or in the US dollar based on weight and caliber (1 dollar =0.88671 grams of pure gold), that is, the ounce became equal to 35 dollars with the value allowed for a margin in the exchange, and the dollar became the main reserve currency of central banks.
اضافة اعلان
In 1971, namely on August 15, US President Nixon announced the cessation of the exchange of the dollar into gold and the "Bretton Woods" system was modified with the advent of the economies of Europe and Japan, which led to the abolition of the mechanism of currency exchange rate stability in practice and the floating phase began, and this included the OPEC oil countries dealing in dollars until this date.
In a simple introduction, let's get acquainted with gold, one of the most important pillars of the most influential assets in the financial markets and attracting investors at the moment, and these poles are: Gold, Oil, Dollar and Cryptocurrencies .
Gold is generally associated with an inverse relationship with the dollar (if the dollar price rises, the gold price falls) and gold is associated with a direct relationship with oil (if the oil price rises, the gold price rises), and these two rules sometimes do not apply in light of global political and economic variables affecting them, as cryptocurrencies are a safe haven as gold may rise and fall with it away from other complications.
Gold is one of the safe havens as a hedge against a currency war on the background of wars because all parties treat it as neutral payments, a guarantee to redeem promises to pay depositors and holders of securities or their trading peers, and in the event of the collapse of major currencies such as the dollar and the entry of the global economy into recession, we will devote the rest of the article to the reasons that may increase the demand for gold and therefore its price rise.
The gold that exists in the world and has been mined since history amounts to 216,265 tons, of which 45% was justified, investments in the form of gold coins and alloys 22%, the reserves of world central banks 17% and the remaining 16% goes into industries and other uses.
Through a review of how the uses of gold are distributed, and the part related to the holdings of central banks that does not reflect what the world previously agreed on, as it covers only a very small percentage of the reserves of world currencies, especially the dollar, and this in itself required a correction decades ago, but global unipolarity prevented this, which now prompted central banks to increase their holdings of gold for fear of a third correction, the end of the era of the dollar in global trading, whose indicators began to appear through increased demand and hedging by central banks and people on safe havens.
One of the most important reasons that led to the crazy increase in gold prices and others that will increase its price in the near future are:
1. Central banks hedge against the uncertainty of the global economy to support their currencies and support their economy by buying gold .
2. Get rid of US Treasury billsfor some countries and buy them for gold .
3. Increased demand for gold by investment funds.
4. High global indebtedness and the inability of some countries to repay, as the US debt reached 38 trillion dollars with fears of continued government shutdown.
5. The confusion in the policy of the US Federal Reserve and the fear of continuous interest rate cuts, especially since two cuts are looming before the end of this year in light of the lack of control over inflation, and the weakening of the dollar as a result of losses suffered.
6. The US policies headed by Trump imposed tariffs on all countries of the world.
7. Fears of a correction in the financial markets as unjustified double rises in the value of stocks do not reflect their true value.
8. Geopolitical tensions as the road map has not yet been clarified in the Middle East, the Russian-Ukrainian war is still at the beginning of the long road to its negotiated end, and the US-China tension is still at its peak, China threatens next month to stop exporting rare elements to the United States.
9. Finally, we should not forget about the rise of the BRICS group and the Shanghai countries and their resort to trading in local currencies in reference to the exclusion of the dollar .
The above reasons are enough to increase the demand for gold as a safe haven and hedge for years to come, in light of its limitations, which makes the continuous rise in its price far from periods of decline to take profits, it is expected that the price of gold during the next 5 years will reach 10,000 dollars per ounce.
GM of Jobkins Center for Strategic Studies.
Expert, strategic and economic analyst.
Engineer Mohannad Abbas Haddadin.
