Gold Market is on Verge of Surpassing Its All-Time High

Gold Market is on Verge of Surpassing Its All-Time High
Gold can produce substantial returns—but only when market conditions are favorable.

Gold has been on a maximum rise recently, with multiple catalysts pushing prices close to historical highs. Over the past six months, the price of gold has increased by approximately 20%, to more than $2,000 per ounce. This puts it within striking distance of gold's all-time record of $2,075, American Business magazine Forbes informed.

In August 2020, gold prices hit an all-time high of $2,075, and analysts are forecasting a potential surpass of that peak in 2023. Driving the demand for gold is the global economy and geopolitical tensions.

Additionally, low-interest rates and central banks' buying are also influencing gold prices globally. According to the World Gold Council, gold demand rose 18% in 2022 to 4,741 tons, with jewelry being the largest global consumer. Gold is also used for industrial and electrical components.

DataTrek Research recommends investing a small portion of a portfolio in gold for diversification purposes. Historically, gold prices have had a low or negative correlation to stocks and bonds, helping to mitigate losses during market downturns. From 1971 to 2022, gold generated an average annual return of 7.7%, far higher than the 4.2% nominal return of the dollar during the same period. Nevertheless, it is important to consider the risks before fully investing in gold.