After the results of the US presidential election were announced, the price of gold, which set several price records this year, began to decline.
What is it? Is it a trend change or a temporary correction? Let’s find out.
Historically, gold has been considered the best financial investment — it is a reliable physical asset whose value has been growing steadily. However, with the development of the global financial market in general and financial instruments in particular, gold began to decline as investors began to diversify their portfolios and pay attention to other financial instruments.
But the last 20 years, when the world has experienced more than one financial crisis, have proven that gold not only continues to be one of the safest assets, but also consistently brings investors profit. And while in the early 2000s a troy ounce of gold cost about $400, and on the eve of the 2008 crisis it was about $1,000, in 2011 it was just under $2,000.
In 2024, gold set several price records at once, and in October 2024-its price has almost exceeded the price of $2,700. Global gold demand grew by around 5% in the third quarter of 2024, setting a record and lifting consumption to over $100 billion for the first time.
The reasons for this process are quite global: economic and political uncertainty and instability in the world, the deteriorating situation in the Middle East, and expectations for the results of the US presidential election. As I have already written, in September, the US Federal Reserve cut its benchmark rate by 50 basis points for the first time since 2020, which led to a decline in US sovereign bond yields, and in early November – by another 25 basis points.
According to financial laws, rapid growth is followed by a temporary decline in prices. This has already happened in the last decade of October. After the announcement of the US election results, gold continued to fall in price: its price dropped to $2600 per troy ounce.
Is this the final correction? We’ll see. But we shouldn’t write off gold, as it is likely to remain an attractive instrument for capital protection.