Gold's Race To $3,000: Mohamed El-Erian Says US And Other Western Nations Can't Afford To Ignore It

Gold prices are nearing the $3,000 per ounce mark, signaling a potential shift in global economic dynamics. Economist Mohamed El-Erian has emphasized the significance of this trend.

What Happened: El-Erian urged the U.S. to take notice and pointed out that gold’s price has surged nearly 40% over the past year, reaching $2,715 per ounce, in an op-ed for the Financial Times. This increase has defied traditional economic influences such as interest rates and inflation. The rise is largely due to countries like China and other “middle power” nations diversifying their reserves away from the U.S. dollar.

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Foreign central banks’ consistent gold purchases have bolstered its strength, reflecting a broader loss of confidence in the U.S.’s management of the global order. This includes the use of trade tariffs and investment sanctions.

El-Erian warns, “As it develops deeper roots, this risks materially fragmenting the global system and eroding the international influence of the dollar and the US financial system. That would have an impact on the U.S.'s ability to inform and influence outcomes, and undermine its national security.”

He advises Western governments to closely monitor this evolving situation due to its implications for national security and global economic stability.

Why It Matters: The recent surge in gold prices coincides with a period of uncertainty in the U.S. markets. On Oct. 17, gold reached a record high of $2,696 per ounce amid U.S. election uncertainties. Despite mixed quarterly earnings, strong retail sales and positive economic data sustained market optimism.

Furthermore, a Bank of America analyst has projected that gold could reach $3,000 by 2025, highlighting its status as the “ultimate perceived safe haven” amid concerns over U.S. fiscal policies. Despite rising U.S. Treasury yields, gold prices have continued to climb, supported by these factors.

Price Action: As per Benzinga Pro, gold ETFs were mostly trading higher during Monday’s pre-market. VanEck Gold Miners ETF GDX was up by 1.04%, VanEck Junior Gold Miners ETF GDXJ was up by 1.65%, ProShares Ultra Gold (UGL) was trading 1.34% higher. However, VanEck Merk Gold Trust OUNZ was trading 0.70% lower.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari