This allows us to make some important assumptions about what the price of gold will do in the coming years. Gold should continue to be sought as a safe haven if there is significant uncertainty about future interest rate levels. It is surprising to many professional investors that gold was the main asset class of the 21st century. As mentioned earlier, I believe that the two factors that will have the biggest impact on the price of gold will ultimately be monetary policy and geopolitics.
However, gold has usually recovered quickly once the threat of deflation passes, a sign of asset quality. It was an era of weakness for the dollar: while gold rose in US dollars, it remained stable in most other currencies. The first of these is the rate of inflation (which, however, is difficult to predict with precision), real rates are the second factor and the third is the price of gold in relation to real value. Unlike strict graphic technicians, when evaluating the gold market I also include a broader perspective, for example, taking into account monetary dynamics and macroeconomic fundamentals.
In addition to interest rate policy, the escalation of geopolitical tensions is one of the most consistent factors for investors and large institutions to buy gold as a safe haven. The combination of closed businesses and high unemployment, much of which is expected to be temporary, has caused prices to fall. It is not surprising that gold is considered to be more attractive when the cash deposited receives a negative real return, compared to those glorious days when you could get a real rate of 4% without taking any risks. From the late 1990s to the first decade of the 21st century, gold was in a prolonged bull market.
When real rates are high, owning gold is less attractive (compared to assets that generate returns, such as bonds). If gold is traded at a discount, it is possible to lose money, but it is difficult to lose a lot of money, and vice versa.