How long could the rise in gold prices continue? - Answered by Elmira Gharibova, Director of Unicapital I.C.

Recently, significant fluctuations in gold prices have been observed. This volatility raises a question: What is causing this unprecedented rise, and how long might it continue?

Historically, gold has been considered the best protective asset in unstable financial market conditions, and it is likely to remain so in the future. Unlike currencies that may lose value over time due to inflation or political instability, gold is a tangible asset that has been preserved through many generations.

The performance of gold during the 2008 financial crisis confirmed its status as a 'safe' asset during economic downturns. While other assets like stocks and bonds suffered significant losses, the price of gold remained relatively stable and even increased.

The uncertainty created by the pandemic in 2020 led to another rise in gold prices. Central banks worldwide were pursuing monetary policies aimed at stabilizing financial markets and stimulating economic growth.

As a result, interest rates fell to historic lows, and governments implemented massive fiscal stimulus measures. These policies heightened concerns about inflation, leading investors to use gold as a hedge against potential declines in global currencies.

Currently, central banks are actively buying gold. Recently, retail buyers in China have also joined them, but we must distinguish between temporary cyclical factors affecting gold and more structural factors. I believe there is a structural trend of increased gold buying due to the rising geopolitical tensions worldwide.

Despite higher-than-expected inflation data for March, many analysts anticipate that the Federal Reserve will lower interest rates in June.

Many investors refrained from opening buy positions before the recent price increase that started in March, as they anticipated a larger correction. The biggest challenge now is waiting for a decline and identifying a new "entry" point for the market.

Overall, the growing global interest in gold has also impacted our client portfolios. Amid the price volatility, we observe that our clients prefer sharp gold trading compared to other financial instruments. This trend has also positively influenced the attraction of new investors to forex trading.