In a remarkable turn of events, gold prices have soared to a new record high, surpassing the $2,100 mark for the second consecutive day. The global fervor for bullion shows no signs of abating, and experts predict a sustained upward trajectory in the coming months.
Analysts are optimistic about gold’s future, citing factors such as geopolitical uncertainty, a potential weakening of the U.S. dollar, and the likelihood of interest rate cuts. The ongoing Israel-Palestinian conflict has intensified the demand for the precious metal, which traditionally thrives as a safe-haven asset during times of economic and geopolitical unrest.
UOB’s Head of Markets Strategy, Heng Koon How, stated, “The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,” estimating a year-end target of $2,200. Nicky Shiels, Head of Metals Strategy at MKS PAMP, echoed this sentiment, emphasizing the reduced leverage compared to 2011 and envisioning prices reaching $2,200 per ounce.
All That Glitters is Gold
On Monday, spot gold prices reached an unprecedented $2,110.8 per ounce before slightly retreating to the current trading level of $2,084.59. This follows Friday’s milestone when gold surpassed the intraday record high set on August 7, 2020.
Bart Melek, Head of Commodity Strategies at TD Securities, foresees an average gold price of $2,100 in the second quarter of 2024, attributing this projection to robust central bank purchases. The World Gold Council’s survey revealed that 24% of central banks plan to increase their gold reserves in the next 12 months, signaling growing skepticism about the U.S. dollar as a reliable reserve asset.
A potential policy shift by the Fed in 2024 could further boost gold prices. Lower interest rates, often accompanied by a weaker dollar, make gold more affordable for international buyers, potentially driving up demand.
Fed’s Role in the Gold Rally
The Federal Reserve’s recent rate hikes in response to the highest inflation in four decades had initially dimmed gold’s appeal. However, hints from Fed officials, including Governor Christopher Waller, about a possible easing of policy if inflation data improves over the next few months, have reignited optimism among analysts.
While Fed Chairman Jerome Powell tempered expectations for aggressive interest rate cuts, his remarks suggested a pause in further hikes. BMI, a Fitch Solutions research unit, emphasized, “We believe the main factors buoying gold in 2024 will be interest rate cuts by the U.S. Fed, a weaker U.S. dollar, and high levels of geopolitical tension.”
As gold continues its unprecedented ascent, investors and analysts alike are closely watching the evolving landscape, anticipating a sustained rally in the precious metal’s value.