The optimists of the gold market are setting metal prices at record levels, with a milestone of US$3,000 per ounce is getting closerdriven by monetary easing by major central banks and a tight US presidential race.
Spot gold hit an all-time high of $2,572.81 per ounce on Friday and is on track for its best annual performance since 2020, up more than 24%, driven by safe-haven demand due to geopolitical and economic uncertainty, as well as strong central bank buying.
In that context, gold could reach $3,000 per ounce by mid-2025 and $2,600 by the end of 2024, driven by interest rate cuts in the US, strong demand for exchange-traded funds (ETFs) and physical demand in over-the-counter markets, according to Aakash Doshi, head of North America commodities at Citi Research.
Last week, the World Gold Council reported that global physically-backed gold exchange-traded funds recorded their fourth consecutive month of inflows in August. With the next Federal Reserve meeting approaching on September 18, markets are on the lookout for the possibility of the first US interest rate cut since 2020. Low rates tend to favor gold, which does not bear interest.
Gold: the data that the market analyzes
Investors are currently pricing in a 55% chance of a 25 basis point cut in U.S. rates and a 45% chance of a 50 basis point cut, according to CME’s FedWatch tool.
If upcoming data signals growth risks and weakness in the labor market, it will raise the possibility of a 50-basis-point cut in November or December, which would further strengthen gold and advance the timing for a $3,000 rally, said Peter A. Grant, vice president and senior metals strategist at Zaner Metals.
Rate cuts by major central banks are already underway, with the European Central Bank delivering its second quarter-percentage-point cut of the year on Thursday. “We are also assessing other factors driving demand from Western investors, including the upcoming U.S. election, which is likely adding uncertainty and gold serving as a hedge against immediate risks,” said Joseph Cavatoni, market strategist at the World Gold Council.
The upcoming presidential election on November 5 could boost gold prices as potential market volatility may drive investors toward the safe haven of gold.
Reaching the $3,000-per-ounce target is possible, according to Daniel Pavilonis, senior market strategist at RJO Futures, who added that the scenario could be boosted by political unrest following the election.
Investment banks and analysts have become increasingly bullish on gold, with Goldman Sachs showing the greatest confidence in the short-term rise of gold, which remains its preferred hedge against geopolitical and financial risks.
Australian bank Macquarie raised its gold price forecast this week and now expects an average cyclical peak in the first quarter of next year of $2,600 an ounce, with potential for a rally towards $3,000.
“While the challenging fiscal outlook in developed markets remains structurally positive for gold, much of this is already priced in, with the potential for cyclical headwinds to emerge later next year,” the Macquarie analysts commented.
Source: Ambito
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