Gold prices are approaching the $3,000 per ounce level, indicating a potential change in global economic dynamics. Economist Mohamed El-Erian emphasized the importance of this trend.
what happened
In an op-ed published in the Financial Times, El-Erian urged the U.S. to recognize this, noting that gold prices rose nearly 40% last year, reaching $2,715 an ounce. This rise challenges traditional economic influences such as interest rates and inflation. The main reason for this rise is that countries like China and other “China powers” are diversifying their foreign exchange reserves away from the US dollar.
Continued gold purchases by foreign central banks are gaining momentum, reflecting a more general loss of confidence in the United States’ management of the world order. This includes the use of trade tariffs and investment sanctions.
El-Erian warned: “If the situation becomes severe enough, there is a risk that the global system could be effectively fragmented and the international influence of the dollar and the US financial system could be undermined.” “It would impact the United States’ ability to provide intelligence and influence outcomes and undermine national security.”
Economists advised Western governments to closely monitor this evolving situation, considering the implications for national security and global economic stability.
why is it important
The recent rise in gold prices has coincided with a period of uncertainty in the US market, with gold hitting a record high of $2,696 per ounce on October 17, amid US election uncertainty. Despite mixed quarterly results, strong retail sales and positive economic indicators kept the market optimistic.
Additionally, Bank of America analysts predict that gold prices could reach $3,000 by 2025, and gold prices continue to rise despite rising U.S. Treasury yields. The current situation emphasizes the gold price’s status as the “safe-haven asset of last resort.” , supported by these factors.
Gold ETF price movement
Gold ETFs were trading higher during the market pre-opening on Monday, according to Benzinga Pro. VanEck Gold Miners ETF (NYSE:GDX) rose 1.04%, VanEck Junior Gold Miners ETF (NYSE:GDXJ) rose 1.65%, and ProShares Ultra Gold (UGL) traded 1.34% higher. However, VanEck Merck Gold Trust (NYSE:OUNZ) was trading 0.70% lower.
This story was created by Benzinga Neuro and edited by Pooja Rajkumari
Also read: Ryan Detrick, historical patterns point to a likely year-end rally for the S&P 500
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