There is an old saying originating from ancient China that at face value sounds like a wish of good tidings, but is actually meant to be something more like a curse: “May you live in interesting times.” It is meant to convey the difficulties and struggles that come with living through inflection points in history.
As decades go, so far the 2020s have certainly been interesting. Seemingly from the get-go, we as global citizens have been subjected to a series of far-reaching crises and destabilizing geopolitical events, from the early months of 2020 when the COVID-19 pandemic and resulting government shutdowns upended the lives of billions to the unanticipated ground war in Eastern Europe that has lasted from 2022 until the present day. Honestly, because of the air of total unpredictability, the past four years have not been a great time to be an economist or a market speculator.
On the other hand, it’s been a really good time to be in the gold business. In fact, in defiance of—or perhaps because of—these calamitous global events, gold has experienced a massive renewal in investment. Since January 1, 2020, the price of gold has increased a whopping 32.5%, or put another way, its value has shot up by nearly one-third in the span of four short years.
So, what are the reasons for this precipitous incline? According to Alexander Spellane, the founder and CEO of Fisher Capital Group, one of the premier precious metals investment firms in the Western United States, the fortunes of gold have always been tied to global stability (or the lack thereof) and our current era is no different. “The rapid increase in the price of gold over the past few years can be attributed to several factors,” says Spellane. “But among these, three global developments stand out: market concerns over the US debt ceiling, volatility in India, and record levels of gold purchased by many of the world’s foremost central banks.”
Market Concerns Over the US Debt Ceiling
To be fair, this trend started significantly before the 2020s dawned. Going back to 2011 and 2013, showdowns between Democrats and Republicans have resulted in uncertainty over whether the US Government would raise the amount it allowed itself to borrow in order to fund its own operations.
“Before the Obama Administration, this was never a major concern. It used to be a rubber stamp issue,” notes Alexander Spellane. Since then, using the congressional vote to raise the federal debt ceiling has become normalized, and there is another round of brinksmanship on the horizon in the coming months. “The markets don’t like this level of uncertainty, particularly regarding the largest economy on Earth,” says Spellane. “When investors sense it in the air, they run to gold, driving the price up.”
India’s Gold Market Volatility
Over the past few years, India’s gold market has been one of the most volatile in the world. As the most populous nation on Earth (recently having overtaken China) and a substantial overall economy, its fluctuations have had significant effects on global gold prices. “India has traditionally been the largest consumer of gold on the planet, but changes to their import tariffs and other new restrictions have added a great deal of uncertainty to that market,” remarks Alexander Spellane. In particular, the government’s decision to raise import duties to curb the country’s growing trade deficit has led to record inflation. “This kind of volatility in India creates a perfect storm for rising gold prices,” Spellane explains. “When uncertainty increases, whether due to rising import duties or fluctuating local prices, investors flock to gold as a hedge against inflation and market instability, pushing prices higher globally.
Record Levels of Central Bank Gold Purchases
Finally, and perhaps most consequentially, since 2020, central banks around the world have been ramping up their gold reserves at record levels, a trend that has actively fueled the rise in gold prices. Countries like China, Russia, and Turkey have led the charge, purchasing substantial amounts of gold as part of their long-term strategy to diversify away from the US dollar. “The rise in central bank gold purchases is a clear signal that global instability, exemplified by the conflicts in Ukraine and Palestine, is leading countries to hedge their currency risks,” says Alexander Spellane. “Central banks traditionally rely on gold as a reserve asset, and with geopolitical and financial uncertainties mounting, they have been loading up on gold in unprecedented quantities. We’ve been noticing this trend over at Fisher Capital Group for at least three years now, but it really ramped up with Russia’s invasion of Ukraine in 2022.” This recent major surge in institutional demand has placed upward pressure on the price of gold, as these large purchasers steadily reduce the supply in the market.
By the standards of the modern era, the first 1,400 or so days of the present decade have been turbulent. Just like the ancient Chinese curse warns, we are indeed living through “interesting times.” At this point, even attempting to predict the future seems like a fool’s errand—that is, in every respect but one: as the turbulence continues and the times grow more interesting, the price of gold should continue its meteoric rise.
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