The price of gold is on the rise. More than 26% since early November, to be exact. As of April 2024, gold prices per ounce were $2,400, compared to November at $1,900 per ounce. Gold is a volatile commodity, so it isn’t unusual for it to experience significant shifts in value over short periods. But that raises the question, why is it happening, and how does it impact investors interested in selling their gold assets or using them as collateral for a gold loan?

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Historical Context Behind the Value of Gold

Gold is inherently valuable and commands a premium over other metals, such as silver and copper, because of its unique luster, demand for jewelry, and, most importantly, its historical significance as a common form of currency, dating as far back as 500 and 600 BCE. Gold is hard to find, yet easy to manipulate into manageable forms of currency, such as coins or bricks. As a result, it was an established medium of exchange for most of the world and even persisted as a backing for currency under the gold standard until just last century. The gold standard was discontinued decades ago, but the precious metal remains a reliable store of value worldwide and a hedge against inflation. Gold is also common in various industrial applications, adding to its immense value.

Why Is Gold Expensive? How Is Gold Valued?

There are several possible reasons for the massive surge in gold prices as of late, from expectations that the Federal Reserve will slow its recent hike in interest rates to conflicts overseas and growing central bank gold reserves.

Demand for Gold Jewelry: The United States, China, and India are the largest gold consumers in the world. As demand for the precious metal in the fashion and industrial sectors rises in those industries, so will gold prices.

Global Central Bank Reserves: Geopolitical tensions and increased gold reserves can impact gold prices. As conflicts emerge between countries overseas, many have opted to invest in gold instead of other stocks to safeguard their wealth. Additionally, global central banks have been buying more gold recently, and in large enough amounts, causing the price of gold to rise.

Supply and Demand: Limits on gold production greatly affect the value of the precious metal as demand rises. For example, most of the accessible gold has already been mined. This factor greatly limits the amount that makes it to market and complicates other logistics, such as occupational hazards for the miners who must now head deeper into mines. These factors tied to supply and demand greatly impact how gold is valued.

Interest Rates: Historically, the value of gold will drop when interest rates are high because higher rates mean better returns on other investments. Many expect the Federal Reserve to ease off on interest rate hikes in 2024, which has boosted the value of gold.

Gold as an Inflation Hedge: Gold is categorized as a “safe haven” investment because it typically holds its value or rises when other assets or stocks aren’t performing well and can help hedge against inflation. When returns on other assets decrease, worried investors will often put their money in gold instead.

The Value of the U.S. Dollar: Gold is generally denominated in U.S. dollars. As a result, gold values will surge when the U.S. dollar weakens because it has become more affordable for other countries to buy. Alternatively, when the U.S. dollar strengthens, demand for gold usually dips.

How High Will Gold Go? 2024 Gold Price Predictions

What are the prospects for the rest of 2024? Gold performs well during high inflation, which has increased by 3.5% since last spring. Moreover, many financial experts predicted in 2023 that gold prices would rise this year, and they have. However, much of the rest of the year will depend greatly on factors such as whether the Federal Reserve will continue to lower interest rates to combat high inflation, the upcoming presidential election, and the prospective candidates’ views on fiscal policies. If there are signs inflation might continue to rise under a new presidency, demand for gold will likely continue to climb as Americans attempt to hedge against inflation.

It's hard to say if gold is a smart investment for 2024. However, with prices at an all-time high, there has never been a better time to maximize the value of your gold jewelry and other assets to create instant liquidity, either by selling it or borrowing against it. Qollateral is the industry’s most trusted and generous lender, providing the safest and highest offer loans.

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