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De-dollarization & Gold Price

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For about 80 years, the US dollar has been the main currency in international trade and the main unit for measuring the value of goods and services globally. However, after the 2007-2008 financial crisis, it became clear that the economies of many countries were highly dependent on the state of affairs in the US. Russia was the first to announce the transition to settlements in local currency with China and Latin America. Later, this initiative was supported by all BRICS countries. Currently, 85 countries support de-dollarization. At the same time, gold and foreign exchange reserves held in US dollars decreased from 73% (2001) to 58% (2023). The central banks of most countries seek to diversify their gold and foreign exchange reserves and consider XAU as a viable alternative to the USD.

US economic problems and potential recession

Unlike central banks, which pay little attention to gold price fluctuations, hedge funds, and major institutional players closely monitor changes in US macroeconomic indicators. Gold has traditionally been considered a safe-haven asset, which is why it is in high demand during periods of economic turmoil, as well as during recessions. 

For objectivity, it is worth noting that the peak of inflation in the US economy occurred in July 2022, when it reached 9.1%. By the summer of 2023, consumer inflation has dropped to 3%. After such news, gold demand fell, as did its price. At the same time, the federal funds rate in the US has reached its highest over the past 20 years, reaching 5.5%. At the moment, experts do not expect that it will decrease in the near future. On the one hand, this is good news for the gold market. With higher interest rates, investors’ appetite for risk decreases, and the XAUUSD demand as a defensive asset grows. However, on the other hand, the yield of treasury bonds is also increasing, which attracts some investors.

The current gold price forecast for today 29.02.2024 is $2 035.71.

Published by ▶️ GOLDCeylon|29/02/2024

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