Gold prices have recently soared to new heights, with analysts projecting further increases.
According to a report by Lee Ying Shan for CNBC, some experts even foresee the precious metal reaching $3,000 per ounce in the coming year, driven by a confluence of global uncertainties and the anticipation of changes in U.S. Federal Reserve policy.
As of 19 August 2024, spot gold remained steady at the previous session’s record of $2,508.14 per ounce. U.S. gold futures surged by 0.16%, hitting a new peak of $2,540.8 per ounce during Monday’s trading in Asia, continuing the upward momentum from last Friday. CNBC noted that this reflects growing market confidence in gold as a safe haven amid current global tensions.
Sabrin Chowdhury, head of commodities analysis at BMI, highlighted that 2024 is poised to be a year of multiple highs for gold, largely due to its appeal during periods of uncertainty. Per the CNBC report, Chowdhury emphasized that gold’s performance is particularly strong when uncertainty is at its peak, pointing to key factors such as the U.S. election year, renewed hostilities involving Ukraine, and escalating tensions in the Middle East.
In particular, the situation between Israel and Iran has become increasingly volatile, with Iran threatening retaliation after the assassination of Hamas political leader Ismail Haniyeh in Tehran earlier this month. In response, Israel has heightened its military readiness, while the U.S. has deployed a carrier strike group and a guided-missile submarine to the region, bolstering its ally’s defense. This geopolitical turmoil has further fueled gold’s ascent.
Another critical driver of the rising gold prices is the growing expectation of a Federal Reserve rate cut in September. CNBC says that July’s Federal Reserve meeting boosted investor confidence that a rate cut is “on the table” for next month. Chowdhury suggested that if the Fed initiates rate cuts, possibly as early as next month, gold could climb to $2,700 per ounce. This sentiment is echoed by other market analysts that CNBC contacted.
The CNBC article also points out that the anticipated rate cuts would lower the opportunity cost of holding gold compared to interest-bearing assets like Treasurys, which are typically considered competitors to gold as safe-haven investments. Moreover, CNBC mentioned that reduced interest rates could also weaken the dollar, making dollar-denominated gold more attractive to investors holding other currencies.
According to a note from Citi analysts cited by CNBC, the sentiment among gold investors appears optimistic in the short to medium term, with expectations for continued price increases over the next three to six months. The bank has set a $3,000 per ounce target by mid-2025, with an average price forecast of $2,550 per ounce for the fourth quarter of this year.
Lastly, CNBC mentioned that traders will be closely monitoring the upcoming annual economic policy symposium in Jackson Hole, where Federal Reserve Chair Jerome Powell is expected to speak. This event could provide further insights into the future direction of interest rates, potentially influencing the trajectory of gold prices.
Featured Image via Pixabay
