Gold’s Rally: XAU Price Surge and Implications
Gold’s recent price surge has positioned it as one of the most coveted assets, overshadowing the US dollar in the financial markets. Currently trading at an impressive $24k, experts predict that XAU could soon reach $2,900, indicating a continuing upward trend in its value.
XAU Becomes the Second Largest Asset Held in Global Banks
The shift towards gold as a preferred asset by global central banks has had a profound impact on its price and standing. Recent analysis by The Kobeissi Letter reveals that gold now accounts for 17.6% of international reserves, marking a significant increase over the past 27 years. This surge in gold purchases by central banks is expected to drive further increases in the price of XAU.
Furthermore, global central banks’ emphasis on acquiring gold has propelled it to become the second-largest asset held in their reserves, surpassing the Euro for the first time. This trend is reflected in the record-breaking net gold purchases of 290 metric tons in the first quarter of 2024. The accumulation of gold by central banks underscores the growing importance of the precious metal in the financial landscape.
The US Dollar’s World Share Declined By 48%
Conversely, while gold’s prominence continues to rise, the US dollar is experiencing a decline in its global dominance. The Kobeissi Letter highlights that the US dollar’s share in world reserves has dropped by 48% since 2017, signaling a shift in the preference of global banks towards other assets like gold.
In the backdrop of emerging dual currency contenders like gold and Bitcoin, coupled with escalating debt levels, the US dollar faces a challenging road ahead. The rise of BRICS and ASEAN nations advocating for a multipolar world order poses a threat to the USD’s stability and value. If the current trend persists, the US dollar may face significant challenges in maintaining its position as the world’s primary reserve currency.
By closely monitoring the dynamics between gold and the US dollar, investors and financial analysts can gain valuable insights into the evolving landscape of global finance and the potential implications for different asset classes.
