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Gold Set for Best Return Since 1979 Amid Geopolitical Tensions and Surge in Money Supply

Rising Demand for Gold Amid Global Uncertainty

As geopolitical tensions continue to escalate globally, investors are flocking towards gold, the ultimate safe-haven asset. Exchange-traded funds (ETFs) focused on gold and gold miners have witnessed significant inflows, with $3.3 billion invested since August alone. This reflects growing confidence in gold as a hedge against market instability and currency fluctuations.

Surge in Gold ETFs Inflows

A key indicator of this heightened demand is the inflow into SPDR Gold Shares (GLD), the most prominent gold-backed ETF. According to Kobeissi Letter on X (formerly Twitter), GLD has seen $644 million in cumulative inflows in 2024, marking a historically high level of interest in the precious metal.

This surge in demand has driven gold prices to £2,022 per ounce, a 34% increase in one calendar year, with analysts predicting that this could be the best 12 month return for gold since 1979. Just a year ago, gold was trading at a much lower £1,510 per ounce (04/10/2023).

Gold Miners Also See Gains

Not just gold, but gold mining ETFs have also experienced a stellar year. The VanEck Gold Miners ETF and VanEck Junior Gold Miners ETF are both up over 30% in 2024, on track for their best performance since 2020. These strong gains reflect investors’ growing confidence in the long-term stability of gold mining stocks as global geopolitical risks mount.

Money Supply Surge Drives Gold Higher

One of the major drivers behind gold’s upward trajectory is the unprecedented increase in global money supply. In 2024, for the first time in history, the combined money supply of the United States, Eurozone, Japan, and China has reached $89.7 trillion. This marks a staggering $7.3 trillion increase over the past year, raising concerns about inflation and the devaluation of fiat currencies.

Geopolitical Tensions and the Middle East Conflict

Recent geopolitical developments have further boosted the appeal of gold as a safe-haven investment. The latest surge in gold prices came after Iran launched 180 ballistic missiles at Israel, escalating tensions in the already volatile Middle East. With ongoing conflicts and uncertainties, analysts predict continued volatility in financial markets, pushing more investors towards gold.

Societe Generale’s Shift Towards Gold

Reflecting the growing demand for gold, French bank Societe Generale has shifted 100% of its commodity allocation to gold, citing heightened geopolitical risks and a weakening broader commodity market. The bank increased its gold holdings to 7% of its total asset allocation, a 40% quarter-over-quarter rise, signalling its confidence in gold’s ability to weather the current economic uncertainties.

Conclusion

With rising geopolitical tensions, a surge in global money supply, and increasing demand for safe-haven assets, gold is set to have one of its best years since 1979. As gold continues to rise amid these challenging times, investors are looking towards the precious metal as a stable and reliable asset in an increasingly uncertain world.

For those seeking a safe-haven asset amid ongoing market volatility, gold remains a top choice, with experts forecasting continued strength for the metal into 2025.

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