For the second day in a row, gold prices broke beyond $2,100 on Monday, as the world’s appetite for metal looks certain to persist.
Analysts predicted that due to geopolitical unpredictability, a probable decline in the value of the US dollar, and potential interest rate reductions, gold prices would likely reach new heights in 2019 and stay over $2,000 levels.
The Israel-Palestine conflict has increased demand for the safe-haven asset, which has led to a two-month gain in yellow metal prices. Additional support has come from anticipation of interest rate decreases. Because it is a dependable store of value, gold typically does well in uncertain times, both economically and strategically.
Heng Koon How, Head of Markets Strategy, Global Economics and Markets Research at UOB, emailed CNBC, saying, “The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold.” By the end of 2024, he predicted that gold prices might rise as high as $2,200.
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 precious metals firm MKS PAMP.
Prior to reversing some of its gains, spot gold prices increased on Monday to a fresh record high of $2,110.8 an ounce. At the moment, it is trading for $2,084.59.
According to LSEG statistics, gold reached $2,075.09 on Friday, surpassing a valuable intraday record high of $2,072.5 on August 7, 2020.
According to Bart Melek, head of commodity strategies at TD Securities, strong central bank purchases will be a major driver of gold prices rising to an average of $2,100 in the second quarter of 2024.
As they become less optimistic about the US dollar as a reserve asset, 24 percent of global central banks plan to boost their gold reserves in the upcoming year, according to a new World Gold Council study.
Melek stated, “This could indicate increased demand from the official sector in the upcoming years.”
He also mentioned the possibility of a Fed policy change in 2024. Reduced interest rates typically cause the currency to fall. When the dollar weakens, international buyers may purchase gold for less, which increases demand.
As inflation reached its highest level in forty years in March 2022, the Fed began a series of rate hikes that reduced the attraction of gold.
Increased interest rates reduce demand for gold, which has no interest, while bonds and other assets with greater yields become more profitable.
Even though Fed Chairman Jerome Powell downplayed the likelihood of further strong rate reduction on Friday, his comments suggested the Fed might be finished raising rates for the time being.
In a recent statement, BMI, a research division of Fitch Solutions, stated, “We believe the main factors buying gold in 2024 will be interest rate cuts by the U.S. Fed, a weaker U.S. dollar, and high levels of geopolitical tension.”
