Gold has seen a remarkable rally in 2024, driven by various geopolitical uncertainties and economic challenges. However, after briefly touching a record high of $2,791 per ounce, the precious metal experienced a pullback, retreating to approximately $2,540 per ounce. Despite this, one analyst believes the price of gold could surge again, potentially reaching a new all-time high above $2,800 by Christmas.
Matthew Jones, a precious metals analyst at Solomon Global, believes the ongoing global tensions, particularly the escalating conflict between Russia and Ukraine, could provide the catalyst for such a price surge. Jones suggests that the geopolitical risks could significantly elevate gold’s value, making a price point of $2,800 before the year ends a real possibility.
Geopolitical Tensions and Their Impact on Gold
“War. What is it good for? Absolutely nothing except driving gold prices to record highs,” quipped Jones in a recent interview. He explains that the intensity of the Russia-Ukraine conflict is one of the most significant geopolitical confrontations of the 21st century, and its potential to escalate further poses a considerable risk to global stability.
Western nations, spearheaded by the United States and NATO, have significantly supported Ukraine, both militarily and economically. There are reports indicating that these countries have tacitly approved the use of advanced weapons, such as long-range missiles, to target strategic sites within Russia. Such developments not only enhance Ukraine’s defense capabilities but also increase the risk of a broader conflict.
As Russia continues to respond forcefully, including lowering its threshold for nuclear retaliation, the stakes have grown higher. Jones points out that Russia has issued repeated warnings about retaliating against attacks on its territory. This escalation could lead to a dangerous confrontation between NATO and Russia, potentially involving direct military action that could spill beyond Ukraine’s borders.
According to Jones, such a scenario—where Russia, the US, and NATO are actively engaged in a world war—would create the ideal environment for gold prices to soar. Gold, traditionally regarded as a “safe-haven” asset during times of uncertainty, would see significant demand, pushing prices to new heights.
Gold as a Safe-Haven Asset in Times of Crisis
Gold’s role as a safe-haven asset is well-documented in history. During times of geopolitical instability, financial markets tend to become volatile, causing investors to flock toward gold as a way to protect their wealth. This increased demand often results in higher prices, and a world war involving major global powers would likely create the kind of instability that drives such behavior.
Jones elaborates on how a global conflict could destabilize financial markets, causing sell-offs in riskier assets like stocks. With the threat of financial collapse looming, investors typically look for tangible, stable assets to safeguard their wealth. Gold, being a universally recognized store of value, would likely see substantial inflows in such a scenario.
Moreover, global conflicts often lead to supply chain disruptions, energy crises, and widespread economic sanctions—factors that can increase inflation and further contribute to gold’s appeal as a hedge against rising prices. Jones highlights that these economic disruptions could create the perfect storm for gold prices, driving them higher as inflationary pressures mount.
Economic Consequences of a World War: A Surge in Gold Demand
War also tends to bring about significant increases in government spending, particularly on military initiatives. This surge in expenditure typically leads to higher national debt and an increase in money printing, which weakens fiat currencies like the U.S. dollar and the euro. In such circumstances, gold becomes a more attractive asset, as it is seen as a hedge against the depreciation of paper currencies.
A global war, particularly one involving Russia, the U.S., and NATO, could also result in higher prices for essential commodities such as oil and natural gas. Both Russia and NATO countries are key players in the global energy market, and disruptions in the energy supply would likely lead to price hikes. This spike in energy prices would fuel inflation, which, as Jones notes, typically boosts gold prices as an inflation hedge.
Another important factor that could drive up gold prices during a global conflict is the fracturing of global trade systems. In the event of a war, trust in international commerce and financial systems would likely erode, and central banks, along with investors, may increasingly turn to gold as a safe, tangible asset.
Central Bank Activity and the Impact on Gold Prices
In times of geopolitical instability, central banks often increase their gold reserves. This is done to diversify their holdings and reduce exposure to volatile foreign currencies. Jones explains that if central banks start buying gold in large quantities, the additional demand could drive gold prices even higher.
This pattern of central bank buying has been seen in past conflicts. For instance, during World War II, the Cold War, and the Gulf War, gold prices trended upwards. In the modern era, with the interconnectedness of global markets, these impacts are likely to be amplified. A war involving major world powers like the U.S., NATO, and Russia would have far-reaching economic consequences that could push gold prices to unprecedented levels.
Historical Precedents and the Potential for Price Increases
Jones draws parallels between the current geopolitical situation and past global conflicts, noting that similar circumstances have historically driven gold prices upward. He cites events like World War II, where gold proved to be a reliable store of value amid global chaos. With the current climate of heightened tensions, the potential for gold to follow a similar trajectory is significant.
The 21st century has seen its own share of geopolitical tensions—particularly with the rise of new global superpowers and the changing dynamics of international relations. A war involving NATO, Russia, and the U.S. could create a scenario where gold, once again, becomes the asset of choice for investors looking to secure their wealth.
A Perfect Storm for Gold Prices
Taking all of these factors into account, Jones believes that a world war involving major global powers could create the perfect conditions for gold prices to surge. He argues that the combination of investor fear, economic instability, and a collapse in confidence in traditional financial systems would likely send gold prices to new all-time highs.
“The perfect storm is coming,” says Jones. “With a world war, we could see gold prices surge beyond what we’ve ever seen before, potentially surpassing the $2,800 mark before Christmas.”
As tensions between Russia and Ukraine continue to unfold, the world watches closely, aware of the potential for a broader conflict. If such a scenario materializes, the demand for gold could escalate rapidly, pushing prices higher as investors seek safety in one of the most enduring stores of value. Whether or not gold reaches the predicted $2,800 remains to be seen, but the growing geopolitical risks suggest that such a surge is entirely plausible.
As we approach the end of the year, investors and analysts alike will be keeping a close eye on the unfolding situation in Ukraine and the broader geopolitical landscape. If history is any guide, gold could once again prove to be a reliable hedge against the uncertainties of global conflict.
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