How to understand the surge in gold? It's not just because of the depreciation of the dollar
Bloomberg's Nour Al Ali pointed out that the rise in gold prices is not only due to the depreciation of the US dollar, as the price of gold priced in Swiss francs has increased by 25% this year, while the Swiss franc has appreciated by over 12% against the US dollar. The increases in platinum and silver are even larger, rising by 37% and 32%, respectively. This indicates that structural demand from central banks is a key driving factor, and if the US dollar continues to weaken or geopolitical risks rise, gold prices could reach levels of $4,000 per ounce
Bloomberg's Nour Al Ali believes that the gold price in Swiss francs has reached new highs this year, proving that the rise in precious metals is not solely based on a weak dollar:
The Swiss franc is a typical safe-haven asset and has performed the best among G10 currencies this year, appreciating over 12% against the dollar. However, the price of gold priced in Swiss francs has still risen by 25% (while the price of gold priced in dollars has risen by 43%). Platinum and silver have seen even larger increases, rising by 37% and 32%, respectively.
This performance mirrors previous periods of market pressure (from the Eurozone debt crisis to the impact of the COVID-19 pandemic), when investors relied on both gold and the Swiss franc as hedging tools. This indicates that the structural demand from central banks is the key driving factor, rather than merely speculative positions or investors buying due to geopolitical panic.
In short, gold priced in Swiss francs serves as a stress test, measuring its safe-haven appeal relative to other assets that already possess a safety premium. If the dollar weakens further or geopolitical risks rise again, then the level of $4,000 per ounce will become the next turning point for gold prices in the global rotation of safe-haven assets.
