Recent events have caused a significant increase in gold prices, especially the terrorist acts carried out by Hamas in Israel. When expressed in a number of foreign currencies, which indicate that the price of gold is rising even more than it is in the US, this increase has reached all-time highs. The relationship between the fears of a full-scale conflict and the increase in gold prices amply illustrates the increasing fragility of the world economy.
To begin with, why would the fighting in Gaza and Israel cause gold prices to rise? Investors frequently view gold as a safe refuge in difficult times. People are not comfortable holding their wealth in fiat currencies as worries grow about the likelihood of an open conflict escalating in the Middle East and maybe expanding globally. People are rushing to secure their riches due to the continuous conflict in Israel and other geopolitical worries like the war in Ukraine and the possible Chinese invasion of Taiwan. These factors have fuelled demand for gold. Due to this demand, prices in a number of foreign currencies have reached all-time highs.
To gauge the considerable effect that the turmoil in the Middle East is having on the world gold market, we shall employ five different currencies. Over the course of the preceding weekend, the prices of gold for each of these five currencies reached record highs. These are the British Pound, Australian Dollar, Chinese Yuan, Japanese Yen, and European Union’s Euro. Numerous of the world’s strongest economies are represented by these currencies. It is no accident that the price of gold has increased concurrently with all of these major currencies. Instead of various nations seeing changes in their own gold prices as a result of their own inflation issues, all of them have witnessed a historic increase in gold prices in the wake of the assaults, and they are all at record highs.
Where is the American dollar? Why have gold prices on the dollar not also hit all-time highs? Even though we have not yet broken the records set earlier this year, The American dollar has also jumped significantly over the last two weeks and has been flirting with jumping over the $2,000 mark again. What is unique about this situation is that the price of gold has been rising steadily on the dollar even though the dollar is performing well. Historically, the strength of the dollar and the strength of gold have worked inversely to each other, and many buy gold purely as a hedge against the dollar. However, this has not been the case during this current price increase. This highlights even more the significant impact that the global uncertainty has caused on the gold market.
