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The price of gold has risen sharply in recent months. It remains unclear: why exactly? Numerous arguments are cited, from the exchange rate of the dollar to interest rates, speculation, and central bank purchases. Yet none can truly convince. “Gold promises solidity,” says Carsten Gerlinger, Managing Director and Head of Asset Management at Moventum AM. “But how solid is an investment whose price movements can ultimately only be guessed at?”

For a long time, the price of gold has been on the rise. At the end of February, the precious metal began a real surge, reaching a record high of $2,400 per fine ounce in mid-April. Since then, gold has eased somewhat. What happens next? In searching for determinants for future developments, it is noticeable that even past prices posed some puzzles. “The development in the gold price couldn’t really be grasped,” says Gerlinger.

The environment actually spoke against the precious metal. Typically, the rule is: if the US dollar falls, the gold price rises. However, during the recent gold boom, the dollar was rather strong. The same with interest rates: gold usually fares better with falling interest rates, but recently, interest rates have been climbing.

Neither the dollar nor interest rates provided support, yet the gold price rose. “The reasons given for this often proved to be flimsy,” explains Gerlinger. Standard explanations include, for example, the wedding season in India. This popular interpretation, however, has significant weaknesses; it often does not temporally match the fluctuations in the gold price. “The markets are not that predictable,” says Gerlinger.

Data from the World Gold Council on physical gold demand for the first quarter of 2024 also provided no compelling explanation for the gold high. Private demand remained more or less unchanged. Other cited reasons for the rise in gold prices are protection against inflation (which is currently decreasing), rising government deficits, and speculative purchases. “However, the latter is contradicted by the fact that there have been significant outflows from gold ETFs recently,” says Gerlinger.

Central banks have been consistently buying precious metals, “but they actually always do,” explains Gerlinger. However, it appears that especially the Chinese central bank is ordering gold – perhaps as a safeguard against sanctions, should they enter into an armed conflict with Taiwan? Or is Russia buying gold with a possible surplus from energy revenues? Here too, the escape from sanctions would be the background. “Therefore, geopolitics, with its various theatres of war and crisis hotspots, seems to be the most likely reason for the rise in gold prices,” says Gerlinger. And not least the fact that this year, half of the world’s population is facing important elections. “Gold still has the safety aspect that many need to calm down in the current situation.”