Gold market bulls are betting on prices to surge to new records amid monetary easing by major central banks and a tight race in the U.S. presidential election, with the $3,000 milestone in focus.
Spot gold hit an all-time high of $2,572 an ounce on Friday and was on track for its strongest annual performance since 2020, with prices rising more than 24%, driven by geopolitical and economic uncertainty and strong central bank buying.
Aakash Doshi, head of North American commodities at Citi Research, said gold prices could reach $2,600 an ounce by the end of 2024 and $3,000 by mid-2025, driven by U.S. interest rate cuts, strong demand for gold ETFs and over-the-counter physical demand.
Last week, the World Gold Council said that global physically-backed gold ETFs saw their fourth consecutive month of inflows in August.
With the Federal Reserve meeting approaching on September 18, the market generally expects the Fed to implement its first interest rate cut since 2020. Low interest rates tend to be good for gold because the metal does not generate interest.
CME's FedWatch tool shows that the probability of a 25 basis point rate cut by the Fed is currently priced at 55%, and the probability of a 50 basis point cut is 45%.
Peter A. Grant, vice president and senior metals strategist at Zaner Metals, said that if upcoming U.S. economic data points to growth risks and weakness in the labor market, the likelihood of a 50 basis point rate cut in November or December will increase, which will strengthen the tailwind for gold and bring forward the timeline for the $3,000 target.
Interest rate cuts by major central banks are underway, with the European Central Bank on Thursday announcing its second 25 basis point rate cut this year.
“We are also assessing other factors, including the potential for increased uncertainty from the upcoming U.S. presidential election and gold’s use as a hedge against immediate event risk,” said Joseph Cavatoni, market strategist at the World Gold Council.
The upcoming presidential election on November 5 could drive gold prices higher as potential market volatility could prompt investors to turn to the safe-haven metal.
Daniel Pavilonis, senior market strategist at RJO Futures, said a target of $3,000 an ounce was possible, adding that such a scenario could be driven by possible political turmoil after the election.
Investment banks and analysts are becoming increasingly optimistic about gold, with Goldman Sachs saying gold has the greatest potential for price increases in the near term and remains its preferred tool for hedging geopolitical and financial risks.
Australia's Macquarie Bank raised its gold price forecast this week and expects the average quarterly price of gold to reach $2,600 an ounce in the first quarter of next year, with the potential to sprint towards $3,000.
“While the U.S. fiscal outlook remains structurally positive for gold, a lot of expectations are currently priced in, with cyclical headwinds likely to emerge later next year,” Macquarie analysts said.
The article is forwarded from: Jinshi Data
