TLDR
- Gold prices reached a new all-time high of $2,509 per ounce on Friday
- Analysts expect gold prices to continue rising, with some forecasting $3,000 per ounce by next year
- Factors driving gold prices include geopolitical tensions, expectations of Fed rate cuts, and economic uncertainty
- The upcoming Federal Reserve meeting and Jackson Hole symposium may provide clarity on interest rate outlook
Gold prices reached a new all-time high of $2,509 per ounce on Friday, as investors continue to flock to the precious metal amid economic uncertainty and geopolitical tensions.
Analysts are predicting further gains for gold, with some forecasting prices to reach $3,000 per ounce by next year.
The recent surge in gold prices can be attributed to several factors. Firstly, ongoing geopolitical tensions, particularly in the Middle East, have increased gold’s appeal as a safe-haven asset. Israel and Iran appear to be on the verge of direct conflict following the assassination of Hamas political leader Ismail Haniyeh in Tehran.
The United States has sent a carrier strike group and guided-missile submarine to the region in support of its ally’s defense.
Expectations of potential interest rate cuts by the Federal Reserve have bolstered gold prices. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making it more attractive compared to interest-bearing assets such as Treasury bonds.
Chicago Fed President Austan Goolsbee stated that the US economy does not show signs of overheating, suggesting caution about keeping restrictive policy in place. Minneapolis Fed President Neel Kashkari also mentioned that it was appropriate to discuss potential US interest rate cuts in September due to concerns about the weakening labor market.
Sabrin Chowdhury, head of commodities analysis at BMI, commented,
“2024 is the year where gold is supposed to reach multiple highs. Gold thrives from uncertainty… [and] uncertainty is at its peak.”
Chowdhury cited the upcoming elections, Ukraine’s recent incursion back into Russia, and growing Middle East tensions as factors contributing to this uncertainty.
However, some analysts suggest that gold prices may see a short-term pullback after the recent rally. The price level of $2,500 is considered high by many traders, and some profit-taking is expected.
The recent rally in US equity markets and a potential easing of geopolitical risks could cap gold’s upside in the near term.
Traders and investors are closely watching the upcoming Federal Reserve meeting and the annual economic policy symposium in Jackson Hole for further clarity on the interest rate outlook. Fed Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday may offer insights into the path forward for interest rates.
Citi analysts maintain a bullish sentiment on gold, forecasting a target of $3,000 per ounce by the middle of 2025 and a fourth quarter average price of $2,550 per ounce this year. They noted that gold investor sentiment looks set for the upside in the three to six-month window.
As of Monday’s Asian trading session, spot gold held steady near Friday’s record high, while US gold futures jumped 0.16% to set a new record of $2,540.8 per ounce. The precious metal continues to trade above its 50-day simple moving average on the daily time frame, suggesting that the upward trend may continue as long as prices remain above this level.
In the coming days, market participants will be paying close attention to speeches by Fed officials, including Raphael Bostic and Michael Barr, for additional clues about the central bank’s monetary policy stance.
The outcome of these events and any developments in geopolitical situations are likely to influence gold prices in the short to medium term.
