Since ancient times, gold has played a vital role in global economies. Its distinctive properties have made it valuable not only for jewelry but also as a dependable way to preserve wealth. In modern times, gold remains a significant component of both investor portfolios and central bank reserves. This review examines the dynamics and factors influencing gold prices, and provides medium- and long-term forecasts for the XAU/USD pair from leading banks and experts.

Gold Prices EXPLODE: Gold mining and utilization began in the 4th millennium BC. Ancient Egypt was among the earliest civilizations to actively use this metal, beginning around 2000 BC. In Egypt, gold held immense significance, revered as “the flesh of the gods” and integrated into nearly every facet of life—from religious ceremonies and burial practices to the creation of vessels, statuettes, jewelry, and home decor. It also served as a means of payment. Gold’s resistance to corrosion symbolized immortality and strength.

Precise data on the value of gold in ancient civilizations is scarce, but it was recognized as one of the most valuable commodities, used for trade and wealth storage. For instance, in Babylon around 1600 BC, one talent of gold (approximately 30.3 kg) was worth about 10 talents of silver (approximately 303 kg).

In the late 8th century BC, in Asia Minor, gold was first utilized as coinage. The initial pure gold coins, stamped with images, are credited to Lydian King Croesus. These coins were irregularly shaped and often minted only on one side.

Gold Prices EXPLODE: In ancient times, gold continued to hold a pivotal role in the economy and culture. The Greeks mined gold in various locations, including the region of Troy, which, according to myth, was endowed with gold by the god Zeus. To the ancient Greeks, gold symbolized purity and nobility, and they used it to create exquisite artworks and jewelry.

In classical Athens (5th century BC), one gold drachma was equivalent to approximately 12 silver drachmas. During the era of Alexander the Great (4th century BC) and the subsequent Hellenistic kingdoms, the gold-to-silver ratio fluctuated but generally remained within the range of 1:10 to 1:12. (Today, this ratio has increased to around 1:80). Alexander the Great issued gold staters weighing about 8.6 grams, which were highly valued coins frequently used for significant international transactions.

Gold Prices EXPLODE: In the Middle Ages, gold continued to be an essential part of the economy. In the Byzantine Empire, the solidus gold coin, weighing 4.5 grams, was used in international trade. Gold also played a significant role in medieval Europe, particularly after the discovery of substantial gold deposits in Africa. The gold florin, introduced in Florence in 1252, became widely used throughout Europe, while England introduced the gold sovereign in 1489.

What could one purchase with such a coin? In England during the 11th-12th centuries, a sovereign could buy a small piece of land, about an acre, or part of a farm. In the 13th century, a gold coin could purchase several heads of cattle, such as two cows or several sheep.

Gold was also used to buy weapons or armor. A high-quality sword might cost about one coin. Additionally, one gold coin could cover the wages of a skilled craftsman for several months, be used to commission the construction or repair of a house, or buy a large amount of food, such as a year’s supply of bread for a family.

Gold Prices EXPLODE: During the Age of Exploration, gold once again took center stage. Following the discovery of America, Spanish conquistadors brought vast amounts of gold to Europe. In the 17th and 18th centuries, gold became the foundation for the monetary systems in Europe. By 1800, the price of one troy ounce of gold (31.1 grams) in Britain was approximately £4.25. At that time, one troy ounce could purchase a small plot of land in some rural areas, pay eight months of housing rent, cover the cost of tailoring four men’s suits, or fund several years of elementary school education.

In the 19th century, the Gold Rushes, particularly in California and Australia, led to a significant increase in gold production and a corresponding decrease in its price. By 1870, the price of one troy ounce of gold was around $20. Starting in 1879, the US monetary system was based on the “gold standard,” which tied the amount of paper money to the country’s gold reserves. This meant that $20 could always be exchanged for a troy ounce of gold, and this price level remained stable until the early 20th century.

Gold Prices EXPLODE: In 1934, 55 years after the adoption of the “gold standard,” US President Franklin D. Roosevelt enacted the “Gold Reserve Act.” This act made private ownership of gold illegal, requiring all precious metals to be sold to the US Treasury. A year later, after consolidating gold under state control, Roosevelt increased its price by 70% to $35 per troy ounce, enabling the printing of more paper money.

For the next four decades, gold prices remained stable at around $35 until 1971, when President Richard Nixon decided to abandon the “gold standard,” detaching the dollar from gold. This decision marked a pivotal moment in the modern world economy. Gold ceased to be used as money and began trading on the open market at a floating exchange rate. This allowed the US government to print unlimited amounts of fiat currency, leading to exponential growth in gold prices.

By the end of 1973, the price of gold had reached $97 per ounce and continued to rise amid economic instability and inflation, reaching $161 in 1975 and $307 in 1979. In 1980, amidst high inflation and political instability (including the Soviet invasion of Afghanistan and the Iranian revolution), the price of gold (XAU/USD) peaked at $850. However, by 1982, the price had fallen back to $376, linked to rising US interest rates and stabilizing economic conditions. Political and economic changes, such as the end of the Cold War and the development of global financial markets, stabilized the gold market.

Until the mid-1990s, XAU/USD traded in the range of $350-$400. By 1999, the price had dropped to $252 per ounce, due to rising stock markets, low inflation, and decreased demand for gold as a safe-haven asset.

Gold Prices EXPLODE: In the early 2000s, gold started around $280 per troy ounce but began to climb after the dot-com bubble burst. It saw a sharp increase during the global financial crisis, reaching $869 in 2008. This surge was driven by economic uncertainty, falling stock markets, waning confidence in the dollar, and heightened demand for gold as a safe-haven asset. By the end of 2010, the price had risen further, reaching $1421. In September 2011, it peaked at a record $1900 per ounce amid the European debt crisis and global economic concerns.

Subsequently, as the dollar strengthened and inflation expectations receded, along with improving stock markets, XAU/USD declined to $1060 by the end of 2015. However, the trend reversed again, and by 2020, gold hit a new record of $2067 per ounce. This surge was driven by the COVID-19 pandemic, prompting extensive monetary stimulus measures (quantitative easing) by major governments and central banks, notably the US Federal Reserve.

In May 2024, the price reached its current historical peak of $2450 per ounce. This increase was influenced by geopolitical tensions in the Middle East, Russia’s military actions in Ukraine, and expectations of interest rate cuts by central banks like the Federal Reserve and ECB.

Firstly, its physical and chemical properties are crucial. Gold is chemically inert, resistant to corrosion, and does not tarnish or rust over time. This durability makes it an excellent store of value. Its enduring attractiveness and lustre make it highly desirable for crafting jewelry and luxury items. Moreover, gold is relatively rare in the Earth’s crust, which contributes to its intrinsic value, as demand consistently exceeds its limited supply.

Economically, gold serves as a hedge against economic instability and geopolitical tensions. During periods of uncertainty, investors often turn to gold to safeguard their wealth from currency depreciation. Its price is influenced by inflation levels and monetary policies set by central banks, such as interest rate adjustments and quantitative easing (QE) or tightening (QT) programs.

Gold is also valued for its role in portfolio diversification, helping to mitigate risks across investments. It offers high liquidity, allowing it to be easily converted into cash or used for transactions globally. Central banks hold substantial gold reserves as part of their international reserves, ensuring currency stability and providing security during financial crises. For example, the Federal Reserve holds a significant portion of its foreign reserves in gold, underscoring its importance as a financial asset.

Gold Prices EXPLODE: The forecasts for gold prices at the end of 2024 and into 2025 show a consensus among analysts from major global banks and agencies that prices are likely to increase.

UBS strategists predict gold could reach $2500 per ounce. J.P. Morgan also targets $2500 in the medium term, contingent on potential rate cuts by the Federal Reserve and ongoing economic instability.

Goldman Sachs has revised its forecast upward to $2700 per ounce for 2025. Bank of America initially expected $2400 by the end of 2024 but adjusted their forecast to $3000 for 2025. They emphasize that a key factor driving this growth would be significant rate cuts by the Federal Reserve, prompting investors to seek gold as a safe-haven asset.

Citi specialists agree with this outlook, stating that gold reaching $3000 per ounce is plausible, especially if there’s a rapid acceleration in the trend of de-dollarization among central banks in developing economies, which could undermine confidence in the US dollar.

Rosenberg Research and Yardeni Research analysts also foresee gold reaching $3000 per ounce, with Yardeni Research suggesting a potential rise to $3500 by the end of next year if there’s a new wave of inflation.

Jordan Roy-Byrne, editor of TheDailyGold Premium magazine, presents an even more bullish outlook based on technical analysis, suggesting that gold could potentially reach $3000 per ounce in the near term, with longer-term targets ranging from $3745 to $4080 based on specific market patterns.

Overall, the consensus points to a bullish sentiment for gold prices, driven by economic uncertainties, potential monetary policy changes, and geopolitical factors influencing investor demand for safe-haven assets.

Gold Prices EXPLODE: Most major banks and financial data providers tend to focus on short- and medium-term forecasts for gold due to market volatility, where small changes in supply, demand factors, or external events can lead to unpredictable price fluctuations, challenging long-term prediction accuracy.

However, there are various long-term scenarios and forecasts for gold extending into 2030-2050. Economist Charlie Morris, in his work “Rational Case for Gold by 2030,” forecasts a price of $7000 per ounce. Another specialist, David Harper, predicts that gold could reach $6800 by 2040, projecting reasonable growth with an annual return rate of approximately 7.2%.

Looking further ahead, Josep Peñuelas, a research professor at the Centre for Ecological Research in Barcelona, has warned that by 2050, the world could face scarcity in key metals, including gold. On a more optimistic note, investor and writer Robert Kiyosaki believes in the enduring value of gold, referring to it as “God’s money” and suggesting it could play a pivotal role in future global finance.

In his book “Fake,” Kiyosaki argues that gold, alongside cryptocurrencies like Bitcoin, might supplant paper currencies and form the foundation of the global financial system.