Two things explain the unexpected trajectory of gold: one is related to geopolitics and the other to global finance.
The ounce of gold reached levels close to 1,430 dollars just last week, its highest level in practically 5 years since similar prices were not observed in said financial asset since mid-August 2015.
In the financial markets, the upward trend deepened at the end of May, although these levels were not expected at a time when the summer holidays theoretically decrease the demand for physical financial instruments such as an ounce of gold, but something has happened that “ shot” the quotes.
This trajectory of gold has led to the fact that its profit for the year is already in double digits. At the close of this Monday in the international markets, the ounce of the gold metal has a profit of 10.14%; Up to now, in the Mexican markets it has been more profitable to invest in gold than to do it in dollars or in fixed income instruments, as well as in most of the shares that make up the stock indices of the fixed income markets. To put it in other words: an ounce of gold is, surprisingly, one of the most profitable investments of the year in Mexico and in other parts of the world, although it is also very risky because as we know, just as it goes up it can go down unexpectedly.
The causes of the increase of the yellow metal
There are two causes that explain the upward adjustment of the gold metal in global financial markets, one is linked to geopolitics and the other to world finance. In a matter of geopolitics, let’s remember the endless conflicts in oil-producing areas such as the Arabian Peninsula and the Middle East.
The conflicts and threats between the United States and Iran recently intensified , analysts consider that they will not go beyond bickering, but the big funds whenever they observe these things think that a certain percentage of coverage is not unnecessary and gold is a asset more than designed for it. It is paradoxical that now that tensions in the Korean peninsula have dropped to a minimum, the ounce of gold has risen significantly. This is nothing more than a reflection of the fact that there are not one but many points of fragility in the world that can alter the global order in any moment.
In terms of world finance, we know the risks that exist in the global economy, with moderate growth in the vast majority of the planet . In addition to this, issues such as the currency war have resurfaced, and with them possible adjustments in interest rates by economies as important as the United States, Europe, Japan and China . The decrease in returns is very probable, the financial risks increase and once again the large investment funds, as well as investors acting on their own, take action on the matter.
The big question is: will the gold trend continue? Unfortunately, this question is very difficult to answer, like everything related to finance, there are trends, analyzes and estimates, but nothing is ever certain.
What does the analysis say about the price of an ounce of gold?
For specialists in issues related to the trajectory of the ounce of gold, the key to what will happen in the coming months is of course the global financial environment, but above all the way in which the market will take such actions , so that do not exceed the price with excessive force levels of 1,480 dollars per ounce. But even if it exceeds them, what is relevant is that the bullish force does not take the prices beyond 1,520 dollars for said asset.
For a little over six years, an ounce of gold has not traded above this level and if it exceeds it, it would be showing signs of further increases, up to a target of 1,800 units , which is its highest price recorded in the last decade. In this context, for analysts, the key to what will happen to the price of an ounce of gold lies more than in the geopolitical environment, in what happens with the global economy in the coming months, especially with interest rates and this new currency war version.
Risks
As we pointed out, gold investments are highly risky; On the one hand, there is the physical management of the asset, unless it is acquired by means of a certificate, or an institution is paid to maintain its safekeeping. On the other hand, there is the fact that despite the unexpected upward trajectory of the market, the truth is that current prices have not broken any relevant parameter and their striking gain is due to the fact that prices were actually very low, barely three years ago. the price looked like it would break the floor of $1,000 per ounce. The risk is that, just as it went up, it can go down, and the floor would mean heavy losses for those who bet on it.
