Gold Demand Trends: What’s Driving the Increase?
Gold has seen steady price increases over the past few years, and experts are predicting that prices will continue to climb in the coming years, especially as more countries begin to dip their toes into the precious metals markets. UBS Global Wealth Management predicts that gold prices will average around $1,700 to $1,800 per ounce next year.
Here are some of the reasons why gold demand is on the rise and will likely continue to increase as we move forward into the future.
Increase in Uncertainty
Gold is seen as a hedge against inflation. This can be attributed to gold having an inverse relationship with regards to inflation and interest rates, where interest rates fall in a period of economic weakness and inflation rises. Due to the emergence of the omicron variant of the coronavirus, people are turning to gold and are taking money out of equities and real estate. The Taliban’s capture of Afghanistan and the standoff between superpowers Russia and the US over Ukraine is also leading to more interest in gold globally.
The Electronics Industry
The electronics industry has also significantly driven up demand for gold, particularly in recent years. It’s not surprising given how integral gold is to technology—it is used in computer chips and as a coating on printed circuit boards as well as other electrical devices. Because of this, gold has become an important material in electronic devices, including computers and mobile phones.
Central banks around the world are increasing their gold reserves as they want to diversify and reduce reliance on the falling U.S. dollar. Central banks also feel more comfortable buying physical gold instead of owning gold derivatives or stocks of companies that operate in that industry.
The demand for gold jewelry in countries such as India is rising thanks to an increasing population and middle class. The increase is also attributed to Indian festivals such as Diwali and Dhanteras as well as the wedding season that takes place at the end of each year.
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