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FiveWheels Update – Legacy Agreement and Exploration Plans

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Some are predicting that gold prices could break through $3,000 an ounce and rise to $4,000 or even $5,000, while others are hopeful that $10,000 or even $40,000 could become a reality.

These impressive price predictions have investors wondering, “What was the highest price gold has ever reached?” The answer to that question is revealed below. By looking at how gold prices have moved historically, we can understand what it means for the metal in the future.

How is gold traded?

Before we look at the all-time high prices for gold, let’s take a look at how the precious metal trades. Knowing the mechanics behind gold’s historical movements will shed light on why and how the price of gold changes.

Gold bullion is traded for dollars and cents per ounce, with trading taking place around the clock around the world, creating a real-time price for gold. Investors trade gold in major commodity markets such as New York, London, Tokyo and Hong Kong. London is considered the center for physical trading of precious metals, including silver. The COMEX division of the New York Mercantile Exchange handles most of the paper trading.

There are many popular ways to invest in gold. The first is by buying gold bullion products such as bullion bars, bullion coins, and rounds. Physical gold is sold on the spot market, which means that buyers pay a specific price per ounce for the metal and have it delivered. In some parts of the world, such as India, buying gold in the form of jewelry is the largest and most traditional way of investing in gold.

Another way to invest in gold is through paper trading, which is done through the gold futures market. Participants enter into gold futures contracts to deliver gold at an agreed upon price in the future. In such contracts, two positions can be taken: a long position, where you accept delivery of the metal, and a short position, where you offer delivery of the metal. Paper trading as a means of investing in gold offers investors flexibility to liquidate an asset that is not available to those who own physical gold bullion.

One of the major long-term advantages of trading in the paper market is that investors do not need to store gold and can still benefit from gold’s safe-haven status. Additionally, gold futures trading requires less capital than trading in the spot market, and therefore offers greater financial leverage.

Interestingly, investors can also purchase physical gold through the futures market, but the process is complicated and time-consuming, requiring significant investment and additional costs.

Besides these options, market participants can also invest in gold through Exchange Traded Funds (ETFs). Investing in a gold ETF is similar to trading gold stocks on an exchange, and there are different options for gold ETFs. For example, some ETFs focus only on physical gold bullion, while others focus on gold futures contracts. Other gold ETFs focus on gold mining stocks or track the spot price of gold.

When investing in an ETF, it’s important to understand that you don’t own physical gold – even gold ETFs that generally track physical gold can’t be exchanged for tangible metal.

Comparing the performance of gold and stock trading, gold has an interesting relationship with the stock market. During “risk-on” periods when investors are bullish, gold and the stock market often move in sync. Conversely, during periods of high volatility, gold and the stock market tend to be inversely correlated.

According to the World Gold Council:Gold is “unique among most hedges in the market” because it can decouple from the equity market during times of stress. It is during these times that gold often outperforms the equity market. As such, gold is often used to diversify portfolios as a hedge against uncertainty.

What was the highest gold price ever recorded?

Gold hit an all-time high of $2,450.05 at the time of writing on May 20, 2024. Gold broke through the key psychological level of $2,000 per ounce earlier this year on growing expectations that the US Federal Reserve would soon begin to reverse course on interest rates. As we move deeper into 2024, concerns about an impending economic recession, or even a strong belief that one is already here, could be a major support for gold.

Gold price chart from May 2014 to May 2024.

Gold Price Chart World Gold Council

Despite this recent surge, gold has seen both highs and lows over the past decade. After hovering between $1,100 and $1,300 from 2014 to early 2019, a weaker U.S. dollar, rising geopolitical concerns and slowing economic growth pushed gold above $1,500 in late 2019.

It was primarily the economic uncertainty caused by the COVID-19 pandemic that caused gold to breach the key $2,000 price level for the first time in mid-2020. To breach that barrier and reach its all-time high, gold rose by more than $500, or 32%, in the first eight months of 2020.

In early 2022, the combination of Russia’s invasion of Ukraine and rising inflation around the world increased its appeal as a safe haven, sending gold prices close to that level again. In 2023, continued inflation and subsequent Fed rate hikes increased the likelihood of a recession, pushing gold prices back above $2,000 and even into sight of its all-time high. The evolving banking crisis Gold prices rose in the spring of 2023, and the outbreak of war between Israel and Hamas in October also put upward pressure on gold prices, causing them to test their previous highs.

What will happen to the gold price in the future?

Predicting the future of gold prices is never easy. There are many factors that influence the price of gold, but the most prevalent long-term drivers include economic expansion, market risk, opportunity cost and momentum.

Economic expansion is one of the biggest contributing factors to rising gold prices as it drives increased demand across various sectors including jewellery, technology and investment. As the World Gold Council explains:“This is particularly true in developing countries where gold is often used as a luxury item and store of wealth.” Market risk is also a major factor driving gold prices higher, with investors viewing the precious metal as the “ultimate safe haven asset” and a hedge against currency depreciation, inflation and other systemic risks.

Going forward, experts will look for clues from factors such as the Fed, inflation, and geopolitical events, as well as supply and demand. On the supply side, the top five gold producing countries in the world are China, Australia, Russia, Canada, and the United States. The consensus in the gold market is that major mining companies have not invested enough money in gold exploration in recent years. Gold mine production has declined from about 3,200-3,300 tons per year from 2018 to 2020 to about 3,000-3,100 tons per year from 2021 to 2023.

On the demand side, China and India are the largest buyers of physical gold and are in a perpetual battle for dominance in gold demand. The world’s largest consumer of goldHowever, it is worth noting that central bank gold purchases have recovered significantly in recent years, hitting a record low in 2020 but are expected to reach a 55-year high of 1,136 tonnes in 2022.

of World Gold Council Central banks reported that their gold purchases for 2023 will be 1,037 tonnes, exceeding 1,000 tonnes for the second consecutive year.

“I think gold is entering a new phase of this bull market,” Adam Rosenquig, managing partner at Goering & Rosenquig, told Investing News Network (INN) in a June 2023 interview. “It probably started in the third and fourth quarter of last year, but it’s going to be driven more by central bank actions than anything else. I think gold is going to go up significantly further in this phase of the bull market.”

“With central banks remaining significant buyers and geopolitical risks and global uncertainty causing investors to look to the safety of gold, the current environment highlights the importance of gold as a strategic asset for portfolio diversification and risk mitigation. Thus, while there may have been a perception of Western countries being uninterested in gold, recent developments suggest there is sustained, broad-based demand for the precious metal,” Joe Cavatoni, North American market strategist at WGC, said in an email to INN at the end of the first quarter.

Should we be concerned about gold price manipulation?

As a final note on the price of gold and buying gold bullion, it is important for investors to be aware that gold price manipulation is a hot topic in the industry.

In 2011, gold hit a then-record high, but then crashed in just a few years. This fall, after three years of impressive growth, led many in the gold industry to accuse and point out manipulation. In early 2015, ten banks were indicted in a U.S. investigation into precious metals price manipulation. Evidence submitted by Deutsche Bank (NYSE:DB) presented “conclusive evidence” that UBS Group (NYSE:UBS), HSBC Holdings (NYSE:HSBC), Bank of Nova Scotia (NYSE:BNS) and other companies were involved in price manipulation of gold and silver in the market between 2007 and 2013.

Shortly thereafter, the long-standing London Gold Price peg was replaced by the LBMA Gold Price in an effort to make gold prices more transparent. The twice-daily process, run by the ICE Benchmark Administration, involves various banks cooperating to set the gold price, but the system is now electronic.

Still, the manipulation has not been eradicated. JP Morgan fined in 2020 (NYSE: JPM) shows that the following year, Chat logs are published The impersonation trial of two former precious metals traders from Bank of America’s (NYSE:BAC) Merrill Lynch unit has shown the traders bragging about how easy it was to manipulate the price of gold.

Gold market participants have consistently been vocal about price manipulation. In mid-2020, Chris Marcus, founder of Arcadia Economics and author of “The Big Silver Short,” said he saw parallels to what happened to the price of gold in 2011, when it nearly hit $2,070 before falling back below $2,000.

Marcus has been tracking the gold and silver markets for almost a decade, with a particular focus on price manipulation. His advice? “Trust your instincts. I believe we are witnessing the ultimate ’emperor really naked’ moment. This is not complicated financial analysis. I sometimes think of this as the greatest hypnotic thought experiment in history.”

Investor View

We know what the highest price of gold is at the moment, but we don’t yet know how high gold will go, or whether gold will reach $5,000, $10,000, or even $40,000.

Still, many market participants believe gold is a must-have for any investment profile, and investors will no doubt continue to watch gold price movements closely throughout the year and beyond.

This is an updated version of an article originally published in 2020 by Investing News Network.

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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interests in any of the companies mentioned in this article.

Editorial Disclosure: Investing News Network does not guarantee the accuracy or completeness of the information reported in any interviews it conducts. Opinions expressed in these interviews do not reflect the opinions of Investing News Network and do not constitute investment advice. All readers are advised to perform their own due diligence.

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