The price of gold is rapidly approaching the $3,000 per ounce mark, signaling a potential shift in global economic dynamics that has caught the attention of leading economists. This surge, which has seen gold prices increase by nearly 40% in the past year, has defied traditional economic influences such as interest rates and inflation, prompting concerns about the US dollar’s dominance and the global financial system.
Renowned economist Mohamed El-Erian, in an op-ed for the Financial Times, has urged the US to take notice of this trend. He points out that the rise in gold prices is largely driven by countries like China and other emerging nations diversifying their reserves away from the US dollar. These actions are fueled by a growing loss of confidence in the US’s management of the global order, particularly in light of the use of trade tariffs and investment sanctions.
El-Erian warns that this trend, if it deepens, could lead to a fragmented global system, eroding the international influence of the US dollar and its financial system. This, he argues, would ultimately impact the US’s ability to influence global outcomes and even undermine national security. He advises Western governments to closely monitor this evolving situation due to its implications for both national security and global economic stability.
The recent surge in gold prices coincides with a period of uncertainty in the US markets. On October 17, gold reached a record high of $2,696 per ounce amidst US election uncertainties. Despite mixed quarterly earnings, strong retail sales, and positive economic data, the market remains optimistic.
Further fueling the gold rally, a Bank of America analyst has projected that gold could reach $3,000 by 2025, highlighting its status as the “ultimate perceived safe haven” amid concerns over US fiscal policies. Despite rising US Treasury yields, gold prices have continued to climb, supported by these factors.
The recent price action in gold ETFs reflects the ongoing market interest. VanEck Gold Miners ETF (GDX) was up by 1.04%, VanEck Junior Gold Miners ETF (GDXJ) was up by 1.65%, and ProShares Ultra Gold (UGL) was trading 1.34% higher during Monday’s pre-market. However, VanEck Merk Gold Trust (OUNZ) was trading 0.70% lower.
The climb of gold prices towards $3,000 marks a significant development, highlighting the evolving landscape of global finance and raising questions about the long-term influence of the US dollar. It remains to be seen how this trend will unfold and what impact it will have on the global economic order.