- Anticipated Interest Rate Reductions Fuel March Rally
- Record Central Bank Gold Purchases in Recent Years
- Even Costco Joins the Gold Market with Sales Initiatives
This week, gold reached an all-time high, continuing its March surge, marking its strongest month in over a year. Typically considered a safe haven in times of economic uncertainty, gold surpassed $2,200 per troy ounce for the first time. Despite expectations of three interest rate cuts this year by Federal Reserve officials, a trend usually associated with gold decline due to its lack of yield, the precious metal has remained resilient.
The recent strength in gold prices can be attributed in part to central banks’ robust buying activity. In 2022 and 2023, central banks purchased over 1,000 tonnes of gold, more than double their net purchases in 2021, as reported by the World Gold Council. Notably, the People’s Bank of China led this surge, accounting for over 20% of central bank net purchases in the previous year.
Additionally, geopolitical tensions, particularly the U.S. response to the conflict in Ukraine, have spurred increased demand for gold. Nations not aligned with the United States are diversifying their reserve mix away from dollars, perceiving them as vulnerable to sanctions. This shift has further supported gold prices, according to a report by J.P. Morgan.
Furthermore, everyday investors have shown a growing interest in gold. Retail giant Costco has witnessed high demand for its 1-ounce gold bars, which quickly sell out upon availability on its website. Similarly, Walmart has entered the gold market by offering gold on its online platform.
With global uncertainties, including geopolitical tensions and a looming presidential election, coupled with anticipated interest rate cuts, gold’s upward momentum may persist throughout the year. Surveys indicate increasing bullish sentiment among Americans toward gold as a long-term investment, surpassing stocks in popularity, according to Gallup. Interestingly, gold’s rally in March coincided with record highs in the stock market, with the S&P 500 reaching an all-time peak and posting a 10.2% gain in the first quarter.
