Over the past 12 months, global gold prices have reached 50 all-time highs, marking the best performance in the last 12 years. This impressive price surge is reminiscent of the late 1970s when the world faced high inflation, economic stagnation, and rising unemployment—an era known as stagflation.
Gold Rises Amid Economic Instability
The current situation in the precious metals market shows steady growth: over the past year, gold has risen by 39%, and since the beginning of 2024, it has gained 16%. Moreover, if this trend continues, it will mark the third consecutive year of positive gold returns.
This trend is linked to growing concerns about the economic situation in the US. In March, core personal consumption expenditures (PCE) inflation stood at 0.37%, indicating a continued rise in prices. At the same time, real consumer spending fell short of expectations.
Further concerns arise from the University of Michigan’s (UMich) consumer confidence index, which has dropped to its lowest level in two years. Even more alarming is that long-term inflation expectations for the next 5-10 years have risen to 4.1%, the highest level in 32 years.
Stagflation and Its Possible Consequences
Historically, periods of stagflation have been accompanied by sharp increases in gold prices. In the 1970s, amid an economic crisis, gold rose in value for four consecutive years. Today’s situation shares similar signs: high inflation, low consumer confidence, and slowing economic growth could trigger further gold price increases.
Investors view gold as a safe-haven asset in times of macroeconomic uncertainty, driving demand. If signs of stagflation in the US intensify, gold prices may continue to rise, attracting even more capital.
EU Prepares Response to US Trade War
Amid economic difficulties in the US, a new trade confrontation is unfolding between the European Union and Donald Trump’s administration. The EU is considering countermeasures in response to escalating trade disputes, but instead of targeting goods, the focus will be on American tech giants.
Potential restrictions may affect companies such as Amazon Web Services, Netflix, Microsoft, Apple, Google, and Meta. European authorities are considering limiting their access to EU markets and curbing intellectual property rights.
If the EU implements these measures, the consequences could be significant. Restricting the operations of major US tech corporations in Europe could lead to substantial job losses, a decline in the tech sector’s market capitalization, and overall economic deterioration in the US.
Rising concerns about stagflation in the US are already reflected in record-high gold prices. Meanwhile, geopolitical tensions between the US and the EU add uncertainty, which could impact financial markets and the global economy.
In the coming months, gold price trends, inflation expectations, and trade conflicts will be key indicators for assessing further economic developments. If current trends persist, gold may continue to rise while the US economy faces new challenges.
