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Amid a significant series of fundamental factors, markets have witnessed a historic week, with the price of gold reaching an all-time high of $2,482 per ounce. The metal has seen a nearly 7% increase this month in the face of a "historic" stock market scenario. Here’s what’s driving the surge in the precious metal’s price.
Political uncertainty and central bank demand drive winds of change
On one hand, market sentiment is at 98.1%, reaffirming the theory of an interest rate cut at the next Fed meeting in September. Two further cuts are expected in November and December as well.
Elsewhere, the possible second arrival of Donald Trump to the White House in November, and this sort of electoral “uncertainty” that the world's largest economy is experiencing, has weakened the greenback.
The dollar index declined 1.71% in July (consistent with Trump’s discourse of an accessible dollar through what the former president has referred to as a “currency war”).
This, along with central bank demand, has directly contributed to the soaring rise of the metal in July. Geopolitical uncertainty also supports the theory of gold prices reaching $2,500 per ounce by the end of 2024.
Gold, so far this year, has increased in price by nearly 20%. It seems strong winds of change are blowing in the world, and, of course, in the markets too.
Cloudy outlook at Wall Street
Wall Street closed Thursday on a bleak day with losses across all sectors, notably the Dow Jones, which fell by 1.31%, while the Nasdaq and the S&P 500 dropped by 0.70% and 0.78%, respectively.
This is mainly attributed to significant profit-taking by many traders who are already anticipating a shift in the Fed's monetary policy in the United States and, as previously mentioned, a possible change of government in the country.
On Thursday, the Nasdaq recorded its worst session in over two years, directly impacted by heavy sales in the tech sector. Less than two weeks ago, the same tech sector was delivering extraordinary returns driven by shares of AI-based companies such as Nvidia.
Moreover, on Thursday night, cybersecurity company Crowdstrike reported a serious flaw in one of its updates, causing chaos for companies using its services.
One of the affected companies is Microsoft, which suffered a global outage, where many users encountered the dreaded "Blue Screen of Death" causing disruptions in banks, media, airlines, etc. Bill Gates' giant is listed on the Nasdaq, and after this unfortunate incident, Microsoft's shares fell by 2.68%.
Disclaimer: The content of this article is intended for informational purposes only and should not be considered as professional advice.
