The Financial Times reported that although inflation risks have subsided this year, gold prices have still risen sharply, sparking calls for more respect for gold. The article analysis points out that central bank demand, Asian wealth growth, and the addition of right-wing liberals have contributed to the golden age of gold enthusiasts.

This year, the general trend of gold investors is as follows: I win on the positive side, and I also win on the negative side.

The rise in gold prices is quite strong, with prices increasing by over 25% since 2024 and currently hovering at a level slightly above $2600 per troy ounce.

This is very advantageous for investors, although often for unexpected reasons. Fahad Kamal, Chief Investment Officer of Coutts, said that about a year ago, he bought a large amount of gold just to hedge. He correctly predicted that risky assets would have a bumper harvest this year and bought extra gold because gold has a well-known trend that when bad things happen, high-risk assets will fall and gold prices will rise - which is clearly a danger in this geopolitical environment. This is the common function of gold, which serves as a backing when active bets on high-risk assets such as low rated corporate bonds or US stocks go wrong.

The performance of gold is so outstanding that Kamal has ended his bet on gold to lock in profits. We choose profit taking and seek diversification elsewhere, "he said.

British media mentioned that the impulse to pack up bonuses and run away at this time is understandable, especially since gold prices have risen by 26% this year, which to some extent masks the astonishing increase in this asset. In February, the benchmark price was less than $2000. From that low point to the high point set at the end of September, the increase was as high as 35%.

However, the long-term problem with gold is why this situation occurs. It is different from other commodities, which are more sensitive to industrial demand and supply, as well as to tools for paying interest or dividends such as stocks and bonds.

At least in theory, their price fluctuations are driven by changes in reputation and future earnings, or at least economic changes. Some investors like to use it as a tool to hedge against inflation, which is indeed effective, but this year gold prices have risen while inflation rates have decreased, and gold has no effect on protecting investment portfolios when inflation hits bonds and stocks in 2022.

Other gold enthusiasts insist that the timing to buy gold is actually not when inflation is rising, but when interest rates are falling - when bond yields are low, holding gold without paying interest is more reassuring. Despite dramatic changes, the yield on 10-year US government bonds has remained almost unchanged this year.

(Source: Financial Times)

British media further explained: "The typical bull market case of gold is that it can serve as a safe haven when geopolitical conditions deteriorate. Similarly, this is good, but strangely, after the recent violent conflict between Israel and Iran intensified, gold did not reach a new high. True die hard believers will tell you that gold is a means of hedging against the imminent demise of devalued fiat currencies and a protection against excessive intervention by central bankers. The point here is that gold is just doing what gold should do

If we could point out a single reason for the rise in gold this year, it would be much simpler, "wrote Joni Teves, a gold analyst at UBS in Singapore." But the reality is that this rise is driven by multiple factors - widespread buying in different parts of the market coupled with a lack of sellers

This kind of analysis may make old school traders smile bitterly, for them, 'more buyers than sellers' can roughly be understood as' I don't know'. However, in this situation, this sentence is very appropriate.

Tevez believes that a series of factors will continue to drive up gold prices from now on, including US interest rate cuts and a weakening of the US dollar. She added that central banks and other "official institutions" around the world may continue to increase their holdings of gold, indicating that governments around the world are increasingly enthusiastic about gold due to concerns about the US ability to freeze Russian dollar assets and a desire to transfer wealth elsewhere. She raised her forecast for gold prices at the end of this year to around $2800, which is $200 higher than the central bank's previous forecast, and will reach $3000 by the end of next year, which is also a significant increase.

Dutch investment firm Robeco suggests that it is time for gold skeptics to show more respect towards it. People who are bullish on gold are sometimes derogatorily referred to as' gold bugs', "said Arnout van Rijn, portfolio manager of Robeco's multi asset team. They are considered to be stuck in the past, unaware that financial markets have changed since the end of the gold standard in 1971. We would never describe Robeco as a 'golden bug' - however, in addition to extensive allocation of commodities, multi asset teams have already begun tactical allocation of gold

He listed three reasons: the demand from central banks, the growth of Asian wealth, and 'right-wing liberals'.

Gold certainly has a specific fan base among more liberal or right-wing groups - a group that is constantly growing. As a way of trading or hedging against their impact on the wider world, gold is difficult to beat. As long as gold attracts new buyers for some reason, it is difficult to imagine why it will be severely impacted in the short term.

As van Rijn pointed out, 'buying triggers buying'.