KEY POINTS
- Global central banks’ monetary easing fuels a sharp rise in gold prices.
- Â Spot gold hits an all-time high of $2,572.81 due to robust demand.
- Analysts predict further increases, with potential rates reaching $3,000 per ounce by mid-2025.
With global central banks loosening their monetary policies and a close US presidential election, bulls in the gold market are locking in bullion prices that are breaking all previous records and approaching the symbolic $3000 per ounce barrier.
Due to significant central bank buying and demand from safe havens as a result of geopolitical and economic uncertainties, spot gold reached a historic high of $2,572.81 per ounce on Friday. It is expected to have its best annual performance since 2020.
According to Aakash Doshi, head of Citi Research’s commodities division for North America, robust demand from exchange-traded funds, over-the-counter physical demand, and US interest rate reduction could push gold prices to $ 3,000 per ounce by mid-2025 and $2 600 by the end of 2024.
Geopolitical uncertainty and Central Bank demand boost Gold’s appeal
August saw inflows into global physically backed gold exchange-traded funds for a fourth consecutive month, according to data released last week by the World Gold Council.
The possibility of the first US interest rate decrease since 2020 is causing markets to become extremely nervous as the Federal Reserve’s next meeting draws near on September 18. Gold, which pays no interest, is generally supported by low rates.
According to the CME FedWatch tool, investors are currently pricing in a 55% likelihood of a 25 basis point US rate decrease and a 45% possibility of a 50 bps cut.
The likelihood of a 50 basis point rate cut in November or December will increase if incoming data indicates growth risks and weakness in the labor market.
This would accelerate the timing of gold’s attainment of $3 000 and increase the tailwind for the metal, according to Peter A. Grant, vice president and senior metals strategist at Zaner Metals. Major central banks are already reducing interest rates; on Thursday, the European Central Bank announced its second quarter-point reduction of the year.
Analysts forecast Gold’s surge beyond $3,000 amid economic risks
According to Joseph Cavatoni, market strategist at World Gold Council, “We’re also evaluating other factors stirring up demand from the Western investor, including the upcoming U.S. election arguably adding to the uncertainty and gold serving as a hedge against immediate event risks.”
Due to the possibility of market instability, investors may turn to gold as a safe haven investment ahead of the November 5 presidential election, which might raise gold prices.
According to Mining Weekly, Daniel Pavilonis, senior market strategist at RJO Futures, stated that reaching the $3 000 per ounce target is feasible and suggested that political turmoil following elections may be the driving force behind the situation.
Investment banks and experts have become more optimistic about gold, with Wall Street bank Goldman Sachs displaying the highest level of confidence in the metal’s near-term rise.
Gold continues to be Goldman Sachs’ favored hedge against financial and geopolitical risks. Australia’s Macquarie increased its gold price projections this week, predicting a quarter average cycle top of $2,600 per ounce in the first quarter of the following year, with a possible surge towards $3 000.
“While the backdrop of challenged developed market fiscal outlooks remains structurally positive for gold, a lot is arguably already in the price, with the potential for cyclical headwinds to emerge later next year,” Macquarie analysts stated.
