- Gold price falls below US$2,330/oz as stable US dollar diminishes appeal
- Investors eagerly await the Federal Reserve's monetary policy meeting amidst inflationary pressures
- Zimbabwe seeks to capitalize on its gold reserves to drive economic growth
Harare- The price of gold dropped below US$2,330 per ounce today attributed to a stable US dollar, which made gold less attractive to international buyers as investors were eagerly awaiting the Federal Reserve's monetary policy meeting scheduled for later in the week, following the release of US Personal Consumption Expenditures (PCE) data that was in line with expectations.
In March, both the monthly key rate and core rate increased by 0.3%, meeting market projections. However, annual headline inflation rose to 2.7%, while the annual core rate remained at 2.8%, contradicting predictions of a slowdown to 2.6%.
These recent economic indicators suggest that inflationary pressures are persisting, with many investors still anticipating the first interest rate cut in September. Higher interest rates tend to diminish the appeal of gold, which does not generate yield.
As a result, the Federal Reserve is widely expected to maintain the current policy rate range of 5.25%–5.5% on Wednesday, signalling that immediate rate cuts are not necessary.
In April 2024, gold reached its all-time high of US$2431.55. It is primarily traded on the OTC London market, the US futures market (COMEX), and the Shanghai Gold Exchange (SGE). The standard future contract for gold is 100 troy ounces.
Gold is considered an attractive investment during periods of political and economic uncertainty hence; it has gained more traction since the middle east and eastern Europe wars. Approximately half of the world's gold consumption is for jewellery, 40% is for investments, and 10% is used in various industries.
China, Australia, the United States, South Africa, Russia, Peru, and Indonesia are the largest producers of gold, while India, China, the United States, Turkey, Saudi Arabia, Russia, and the UAE are the biggest consumers of gold jewellery.
Since the beginning of 2024, gold has seen an increase of 275.02 USD/t oz. or 13.33%, according to trading on a contract for difference (CFD) that tracks the benchmark market for this commodity.
The top six countries with the largest gold reserves are the United States, Germany, Italy, France, Russia, and China. In Zimbabwe, gold is the largest foreign currency earner, with minerals contributing over 60% of foreign currency receipts.
One-third of the country's exports are minerals, with gold being a significant component, followed by the platinum group metals. The top three gold producers in Zimbabwe are Freda Rebeca, Caledonia Mining Corporation, and Padenga Holdings, with annual production surpassing 2000 kilograms.
With the introduction of a gold-backed currency, gold holds even greater significance in the country.
However, there is a pressing need to address illegal gold mining, which accounts for 60% of the country's gold production. Additionally, corruption, as highlighted in Al Jazeera's Gold Mafia documentary, needs to be tackled.
According to government sources, Zimbabwe loses US$100 million in gold revenues due to corruption. However, an analysis by Gold Mafia suggests that the country may be losing 200 US dollars per month rather than per annum.
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