Gold breaks records after investors pay attention

The price of gold has been reaching record levels. Just this week, it surpassed $3,500 per ounce, a historic high for the commodity. Ricardo Evangelista, CEO of ActivTrades Europe, says this appreciation reflects "the weakening of the US dollar and increased demand for safe-haven assets."

And he adds: "The precious metal has been gaining ground since Jerome Powell hinted that interest rate cuts could be on the horizon, with the appreciation accelerating after the US president announced the resignation of Federal Reserve Governor Lisa Cook – a decision that rekindled concerns about the central bank's independence and fears of political interference in monetary policy."

This appreciation isn't new. Since the beginning of the year, the price per ounce has already increased 30%. And the trend is set to rise. "The prospect of a weak dollar, supported by expectations of a Fed rate cut and some investor shift away from US assets, should continue to influence market sentiment until the end of the year, benefiting gold due to the inverse correlation between the two assets," says Ricardo Evangelista.

The expert also admits that, as the possibility of peace between Russia and Ukraine fades and while the fighting in Gaza is still in sight, this geopolitical turmoil is likely to increase demand for safe-haven assets, supporting the precious metal. "This dynamic is accentuated by fears that political interference could compromise the Federal Reserve's independence, as well as by uncertainty surrounding trade tariffs," Evangelista considers, adding that, "in this context, investors will be paying close attention to the release of relevant economic data throughout the week, including Friday's US employment figures, which could reinforce negative sentiment toward the dollar and offer new support to gold if they confirm expectations of a cooling US economy."

Given this scenario, the CEO of ActivTrades Europe does not hesitate: "This development is detrimental to the credibility of the world's largest economy, putting pressure on the dollar and resulting in losses against other benchmark currencies, which, in turn, has supported gold due to the inverse correlation between the two assets. With the growing possibility of a rate cut as early as September, doubts regarding the Fed's long-term independence, and an uncertain economic environment marked by trade tensions and fears of a return to inflation, expectations remain that gold prices could post further gains."

How to invest

Although gold continues to be seen as a good safe haven investment in this case, this advantage only applies to the metal in physical terms, since, when it comes to investing in financial products associated with gold (funds, ETFs, among others), it is necessary to take into account that the price of this raw material is extremely difficult to predict.

There are other disadvantages related to its appreciation potential and market speculation. And, contrary to what you might think, when you decide to sell gold bars, there's no guarantee you'll make money. Considering the commissions and margins charged by banks, the loss will be even greater. It's very likely that, even during a period of rising international gold prices, you won't get a better price for the bars, given the difference between the sale and purchase price. But regardless of the chosen method of investing in the precious metal—whether holding it in your hands, buying coins and bars, or investing in financial products with exposure to gold—investors should always consider the time horizon, which should be viewed from a long-term perspective. And, if you intend to store the bars in a bank vault, you should factor in the monthly payment.

Silver follows the trend

Silver is also following this upward trend, having already registered a 33% increase year-to-date, surpassing that of gold. "This movement is supported by solid fundamentals such as the structural deficit in the silver market, which has been recorded over the last five years, while industrial demand reaches record levels, driven by technological revolutions and the energy transition," explained XTB.

Even so, the brokerage's analysts admit that silver remains undervalued relative to gold. "The ratio between the two metals is at 87, well above the historical average of 50 to 60," they emphasize, noting that "a normalization to average levels would imply that the price of silver could exceed $55 per ounce."