Rising Threat Of World War III Could See Gold Hit $2,800 By Christmas

(Movember 21, 2024 - Jordan Finneseth)

(Kitco News) – Gold’s record-setting rally in 2024 hit a wall of resistance around $2,791/oz, leading to a pullback to $2,540/oz, and while some have warned of an extended consolidation period, one analyst thinks the yellow metal could hit a new all-time high above $2,800 before Christmas.

“War. What is it good for? Absolutely nothing except driving gold prices to record ATHs,” said Matthew Jones, precious metals analyst at Solomon Global. “In the current climate, $2800 before Christmas is not out of the question.”

“The ongoing conflict between Russia and Ukraine has become one of the most intense and geopolitically significant confrontations of the 21st century,” he noted. “Western nations, led by the United States and its NATO allies, have provided Ukraine substantial military aid. Reports suggest that the West is tacitly approving the use of long-range missiles like the ATACMS or Storm Shadow to target strategic sites inside Russia and supplying landmines.”

“While this bolsters Ukraine's ability to disrupt Russian logistics and military operations, it raises the stakes for the broader conflict and could mark a dangerous intensification of the war,” Jones warned.

He highlighted that Russia “has repeatedly warned that attacks on its territory could provoke severe responses, including targeting Western supply routes or infrastructure in NATO countries,” saying that such retaliation “could trigger a direct NATO-Russia confrontation, escalating the conflict beyond Ukraine’s borders.”

“A world war involving Russia, the US, and NATO could drive gold prices to record highs due to several interconnected economic and geopolitical factors,” he suggested.

Jones elaborated on this prediction by noting that “Gold is considered a ‘safe-haven’ asset during periods of geopolitical uncertainty, war, or economic instability.”

“Investors typically flock to gold to protect their wealth, leading to increased demand and higher prices,” he said. “A global conflict would likely destabilize financial markets, causing sell-offs in stocks and riskier assets. As investors seek stability, gold could see significant inflows, further driving its price.”

He noted that during times of heightened conflict, supply chain disruptions, energy crises, and widespread economic sanctions are common, which could all bode well for gold’s price. “These disruptions can fuel inflation and economic instability, both historically positive factors for gold prices,” he said.

“Governments involved in war often resort to significant military spending, leading to increased national debt and money printing,” Jones added. “This can weaken fiat currencies like the US dollar or euro, making gold more attractive as a store of value.”

He also highlighted that a war between Russia, the U.S., and NATO “could drive up prices of essential commodities, particularly oil and natural gas, as both Russia and NATO countries play key roles in global energy markets. Higher energy prices would stoke inflation, which tends to boost gold as an inflation hedge.”

“A world war could fracture global trade systems, reducing trust in international commerce and financial systems,” Jones warned. “In such a scenario, central banks and investors may turn to gold as a universally recognized and tangible asset.”

Another common development during times of geopolitical instability is central banks increasing their gold reserves “to diversify their holdings and reduce exposure to volatile foreign currencies,” he said. “Increased demand from central banks would contribute to higher gold prices.”

“During past conflicts, such as World War II, the Cold War, and the Gulf War, gold prices generally trended upwards,” he noted. “Modern wars tend to have broader economic impacts due to the interconnectedness of global markets, which could further amplify the demand for gold.”
Taking all this into account, Jones concluded that “A world war would likely create a ‘perfect storm’ for gold prices to surge to record highs, driven by investor fear, economic instability, and the collapse of confidence in traditional financial systems.”