12.04.201912:52 Forex Analysis & Reviews: Gold as insurance against hyperinflation and driver of economic growth

According to analysts, the value of gold in relation to most world currencies has reached record levels. Experts call the yellow metal reliable protection against hyperinflation and focus on its key role in the global economy in the long term.

Analysts believe that an illustrative example of the depreciation of the national currency is the situation in Venezuela, which is dominated by record hyperinflation, as a result of which paper money lost purchasing power. Another illustration is the galloping inflation in Turkey, where prices rose by 20% in March 2019. According to forecasts, by the end of this year, the fall of the Turkish economy could reach 3%.

The current situation is favorable for the precious metal. Last week, the leading market players, market makers (literally – "market makers"), made a number of large purchases of gold. According to analysts, this fact indicates that with a price below $1300 for 1 troy ounce, precious metals will say goodbye forever. During five trading sessions, large hedgers purchased over 76 thousand contracts (1 contract = 100 ounces), or almost 295 tons of gold at a price of $1285 to $1300 for 1 troy ounce.

According to experts, this is an impressive figure for one week, indicating that the value of gold will rise steadily and is unlikely to return to previous values. Market makers, active buyers of the precious metal, form this trend themselves. They buy the yellow metal at a lower price and sell on its growth. By purchasing this metal, they hedge the purchase of "short" positions on the exchange in futures and options. Large purchases of these market players mean only one thing: a further drop in prices is either limited or unlikely.

Analyzing the situation on the market of the yellow metal, the experts come to the conclusion that the price of gold will continue to consolidate in the narrowing range of $ 1280- $ 1350 with an increase in local minima. According to forecasts of experts, in the second half of 2019, the precious metal will begin to rise in price. The peak price of gold should be expected in 2021 at about $1900-$2000 for 1 troy ounce. From this point on, a relatively deep correction will begin with a possible failure of the price in 2022, analysts summarize.

The external geopolitical background also contributes to the formation of the cost of precious metals. In the next fifteen years, experts expect the pendulum of world leadership to swing toward Asia, and the United States will not play its former significant role. In such a transitional period, one should not hope for stability in global financial markets. Analysts do not exclude the growth of trade and money conflicts, due to which the role of gold in the global financial system will be very high.