Do you know why Gold is at $4000?
This is the only reason for it.
It all started in 2022.
Russia attacked Ukraine in Feb/Mar 2022.
US & its allies decided to freeze Russia’s foreign exchange reserves to the tune of $300bn. The reserves were majorly in Euro & USD.
It's a case of confiscation of asset without a clear return date. Scary, if it happens to our assets, isn’t it?
This was unheard of and shook many Central Bankers of the world.
They decided one thing, diversify our reserve asset away from currencies & invest the sum in assets that cannot be frozen ever.
Gold was the answer!
Many central bankers from India, Poland, China, Turkey & few more started buying gold in droves.
The demand for the sanction proof metal used to be about 400 tonnes/year before 2022. It shot up to 1000 tonnes/ year post the freeze.
This consistent demand kept pushing gold prices higher despite higher US interest rates.
Even now China is loading up on gold every month to build & secure its reserve.
What would have happened if war hadn’t happened?
Gold would have still done well but not touched $4000. It would have given us Indians decent protection against INR depreciation & general supply demand metrics would have kept the prices at least 25% lower.
What does the future hold?
Honestly, I didn’t make too much money from this gold rally and at the price point I would be skeptical of investing in lumpsum. If central banks continue to buy gold, then prices can still shoot up. So, I am holding gold but adding new investments systematically.
This is how US sanctions on Russia gave life to a dull asset like Gold.