Gold Price Over 10 Years And The Trends In Different Times

Gold has always been used as a barometer when it comes to global economic and political sentiment throughout history. This precious metal has held a powerful  grip on the human psyche, from the Queen of Sheba’s gift of gold to King Solomon to the Australian gold rush. 

Its symbol of power, wealth, and permanence endures to this day as different themes such as central bank buying, and inflation rear their heads. Times of stress also make gold attractive, and it is volatility in today’s financial markets that keeps gold bugs attentive to potential trading opportunities ^[1].

It’s worth looking at the main drivers for gold as an asset class. Then we can dive into price action over the last decade to discover some of the recent fundamental and technical reasons for moving the yellow metal. 

Gold as an Asset Class in Australia

Gold’s pedigree as a store of value goes right back to the time of the ancient Egyptians. This is when gold was first made an official means of exchange in a trading sense.. To this day, gold is still perceived as the ultimate object of wealth, and also of monetary accumulation. With this history of utility in currency and as physical jewellery, it’s little wonder that gold’s status as a favoured haven asset and means of diversification endures.  

Safe Haven

For market participants, gold has a tendency to retain or rise in value during periods of turbulence and volatility. It is considered a rather stable asset,and it boasts a long history of price increases in periods of upheaval and turmoil. A prime and very recent example of this was the rise in gold during the global pandemic in 2020 when buyers pushed prices to record highs at $2,075^[2].

Inflation hedge

Gold is also an attractive asset in times of broad, general price pressures. Inflation means a reduction in the buying power of paper currencies, including how much gold can be bought for a given amount of paper currency. This precious metal is a proven long-term hedge against inflation as it protects purchasing power against potentially excessive asset price inflation and currency debasement.

On the flip side, less risky times see the demand for the precious metal generally fall. There are potentially alternative, albeit risky areas of the market that become more viable.

How the Aussie Dollar Influences Gold Prices

Price action in AUD/USD has only a minor impact on gold prices, primarily due to the US dollar side of the currency major. The price of gold is inversely correlated to USD because the metal is denominated in US dollars. 

That typically means that a stronger greenback is likely to keep the price of bullion low. On the flip side, the weaker USD tends to drive up gold prices due to increased demand. That is due to the fact that more gold can be bought when the US dollar is weaker. 

Regarding AUD/USD specifically, the Aussie is generally seen as a cyclical, high-beta currency that outperforms when the global economy is doing well, and risk sentiment is buoyant. Ordinarily, it follows that uncertainty at that time is low which means there may be less demand for safe haven assets like gold. 

Australia is a major player in worldwide gold mining, along with other countries like China, South Africa and the US. Global gold production may affect the price of gold with supply and demand factors in play. However, gold output has not changed significantly since 2016. 

Local and Global Factors Influencing Gold Prices in Australia 

Rising geopolitical events often affect the price of gold. We only have to look at the strong demand at the start of the Ukraine / Russia conflict which pushed gold prices higher. That has been seen across history when there is more uncertainty in the global political arena. 

Times of economic uncertainty brought on by increased geopolitical tensions typically see investors increase their gold positions due to its enduring value. History has taught us that the yellow metal is often considered a safe haven asset, providing protection during periods of political instability.  

Global economic trends can have a big bearing on local gold prices. US interest rates and the US dollar have a major impact on bullion, and they are governed by the state of the world’s biggest economy. 

Gold is a non-interest bearing asset so higher interest rates due to a strong global economy may see investors looking elsewhere for higher-yielding assets. On the other hand, a weak global economy might result in more demand for gold as interest rates are low. 

Other Factors that Will Affect Gold Prices

To make informed decisions before buying or selling gold in the gold market, it is crucial to understand the various factors that affect gold prices. Supply and demand, inflation, market sentiment, and monetary policy decisions all play significant roles in the gold markets. High demand and limited supply can drive up gold prices, while low demand and high supply can cause prices to drop.

Additionally, inflation and economic uncertainty can increase demand for gold as a safe-haven asset. Market sentiment, or the perception of market participants regarding economic and political stability, can also influence demand for gold. Finally, changes in interest rates resulting from monetary policy decisions can have a significant impact on the demand for and price of gold, making it essential to monitor central bank decisions.

Price Movement of Gold Over the Last 10 Years (2014 – 2024) ^[3,4,5,6,7]

Chart 1: Gold Price from January 2014 to June 2024 (https://www.tradingview.com/x/MmTYjcmf/) 

From 2014 to 2016, gold prices experienced a downward trend before breaking out in 2016. The US-China trade war, various geopolitical conflicts, and increased demand from central banks contributed to a bullish trend in the market. 

This trend led to gold reaching a new record high of $2,075 during the Covid-19 pandemic in August 2020, fueled by recession fears and significant monetary and fiscal stimulus. The market then stabilised, maintaining levels above $1,800 throughout the following year, before surging to $2,070 in a single session in March 2022, driven by the conflict in Ukraine and rising inflation. 

Key levels to watch in the near term include the peak of June 2021 at $1,916 and the high of November 2021 at $1,877. High inflation could suppress “real” interest rates, though it remains uncertain whether market rates will significantly outpace inflation. 

In July 2022, the World Gold Council forecasted potential headwinds for gold, suggesting a challenging outlook for the market. 

Post-pandemic, gold prices initially dipped but began to climb again towards the end of 2022, settling in a range between $1,700 and $1,900. 

The year 2023 saw fluctuating demand and notable price changes in the gold market. Increased purchases by central banks and Chinese consumers were balanced out by less interest in ETFs and a reduced Indian market. The year began with gold at $1,839 per ounce, boosted by a weaker US dollar and lower US Treasury yields, peaking in January at $1,950.17 due to strong buying from central banks and investors looking for security. 

However, following a US Federal Reserve rate hike in February, the price fell to $1,809.87 as the US dollar gained strength and yields increased. Interest in gold as a safe investment revived in March following the banking crisis triggered by the collapse of Silicon Valley Bank, underlining how central bank policies and economic changes can significantly impact gold prices. 

Gold prices surged past $2,000 per ounce in early April 2023, driven by ongoing geopolitical uncertainties, including conflicts and trade disputes. However, prices began to decline in the third quarter after the Federal Reserve decided to hold interest rates steady. 

In the fourth quarter of 2023, gold prices rallied once more as the Israel-Hamas conflict heightened geopolitical tensions. This trend continued into 2024, with prices increasing over 17% from the beginning of the year. 

On April 12, 2024, gold reached a new historic peak of $2,431.29, as tensions escalated between Israel and Iran. 

Forecasting Gold Prices in Australia

On the charts above, short-term bullish momentum in gold is picking up marginally in the daily Relative Strength Index (RSI). This widely followed indicator is rising above 50 after a short period of time around 50 which meant conditions were relatively neutral. Prices have also moved above a major retracement level (38.2%) of the recent four-month range at $2404. Strong resistance lies above here at the recent all-time high at $2483. Gold failed just below here at the start of August printing at $2477.   

Regarding ETF flows, following the strongest month since May 2023, global gold ETFs have now seen inflows for two months in a row, according to data from the World Gold Council ^[8]. Although those June and May inflows helped limit global gold ETFs’ year-to-date losses, this remains the worst first half of the year since 2013.  

Future gold prices in Australia will depend primarily on the US Fed and expectations for rate cuts. This will determine Treasury yields and the direction of the US dollar. At present, money markets price in more than three 25 bps rate reductions for this year which is likely to underpin support for gold prices.  Experts believe the current economic climate as well as elevated geopolitical tensions – including conflict in Ukraine and the Middle East, as well as China and US tensions into the US election – are key factors going forward. 

Other influences include: 

• Physical demand for gold that could be stronger, especially from India, due to import duty cuts and the recent price correction.
• ETF buying has increased in recent months after disappointing many experts over the last year or so. Investor holdings in gold ETFs generally rise when gold prices gain, and vice versa.
• Central bank buying has continued recently with India leading the way, but China has seen a slowdown in gold purchases in recent months. The People’s Bank of China didn’t add gold to its reserves for a third straight month in July. That contrasts sharply with its previous 18-month buying spree which ended in May.

A New Way to Trade

Now that you see some of the finer details and reasons why gold trading has such a strong appeal, you can think hard about if you are ready to start trading in gold. 

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