Gold's Unstoppable Ascent: Why Some Experts See No Upside Limit

gold market

EDITOR'S NOTES

As the world grapples with economic and geopolitical uncertainties, gold stands out as the beacon of stability and security. This article spotlights gold’s remarkable journey towards new heights, underscoring its enduring value in times of turmoil. With its proven track record as a safe haven, gold’s rising prices reflect not just market trends, but a deep-rooted trust in its ability to safeguard wealth against the backdrop of a volatile global landscape. In this era of unpredictability, gold emerges not just as a commodity, but as a necessary bastion of financial security.

KEY POINTS

  • Spot gold prices rose to a record high above $2,100 per ounce before giving up some gains.

  • Prices of the yellow metal have risen for two consecutive months with the Israel-Hamas conflict boosting demand for the safe haven asset.

  • Gold prices are expected to remain above $2,000 levels next year.

Gold prices notched another record to kick off the week — with spot prices touching $2,100 an ounce as the global rush for bullion appears set to continue.

Spot gold briefly traded above $2,100 an ounce on Sunday evening in New York, setting a new all-time high, before falling about 2% on Monday to roughly $2,028 per ounce. Gold futures hit an intraday record of $2,152.30 but settled down 2.27% at $2,042 per ounce.

Gold prices are on course to hit fresh highs next year and could remain above $2,000 levels, analysts said, citing geopolitical uncertainty, a likely weaker U.S. dollar and possible interest rate cuts.

Prices of the yellow metal have risen for two consecutive months with the Israel-Hamas conflict boosting demand for the safe haven asset, while expectations for interest rate cuts have provided further support. Gold tends to perform well during periods of economic and geopolitical uncertainty due to its status as a reliable store of value.

“The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,” Heng Koon How, head of markets strategy, global economics and markets research at UOB, told CNBC via email. He estimated that gold prices could reach up to $2,200 an ounce by the end of 2024.

Similarly, another analyst is bullish on bullion’s outlook.

“There is simply less leverage this time around vs 2011 in gold ... taking prices through $2,100 and putting $2,200/oz in view,” said Nicky Shiels, head of metals strategy at MKS PAMP.

All that glitters is gold

The price of gold settled just below $2,100 on Friday for a record high after rising 4% last week. It briefly broke above that level when trading began again Sunday evening, before both spot and futures prices dipped about 2% on Monday.

Bart Melek, head of commodity strategies at TD Securities, expects gold prices to average $2,100 an ounce in the second quarter of 2024, with strong central bank purchases acting as a key catalyst in boosting prices.

According to a recent survey by the World Gold Council, 24% of all central banks intend to increase their gold reserves in the next 12 months, as they increasingly grow pessimistic about the U.S. dollar as a reserve asset.

“This means potentially higher demand from the official sector in the years to come,” Melek said.

A possible policy pivot by the Federal Reserve in 2024 could also be in the cards, he added. Lower interest rates tend to weaken the dollar and a softer greenback makes gold cheaper for international buyers thus driving up demand.

The Fed started its steady stream of rate hikes in March 2022 as inflation climbed to its highest in 40 years, diminishing gold’s appeal. 

Higher interest rates hurt demand for gold, which does not pay any interest, as assets such as bonds become more lucrative due to their higher yields.

On Nov. 29, Fed Governor Christopher Waller said he envisioned easing policy if inflation data continues to improve over the next three to five months, prompting analysts to forecast a spike in gold prices.

On Friday, while Fed Chairman Jerome Powell pushed back on expectations for aggressive interest rate cuts ahead, his remarks indicated the central bank may at least be done hiking for now.

“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,” BMI, a Fitch Solutions research unit, said in a recent note.

 

Originally published by: Lee Ying Shan on CNBC

Print Friendly, PDF & Email

sign up for the newsletter

By signing up, you agree to our Privacy Policy and Terms of Use, and agree to receive content that may sometimes include advertisements. You may opt out at any time.

7 steps - Lead Gen

More Alt Money