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Gold prices hit a new record on Monday for the second day in a row, with spot prices touching $2,100, as the global bullion rush looks set to continue.
Gold prices are on track to reach new highs next year and may remain above $2,000 levels, analysts said, citing geopolitical uncertainty, potential weakness of the US dollar and potential interest rate cuts.
Prices of the yellow metal rose for two consecutive months as the Israeli-Palestinian conflict boosted demand for safe-haven assets, while expectations of interest rate cuts provided further support. Gold tends to perform well during periods of economic and geopolitical uncertainty due to its status as a reliable store of value.
“The expected decline in both the US dollar and interest rates through 2024 is a major positive driver for gold,” Heng Kun How, head of markets strategy and global economics and markets research at UOB, told CNBC via email. He expected gold prices to reach $2,200 by the end of 2024.
Likewise, another analyst is optimistic about bullion’s outlook.
“There is simply less leverage this time compared to 2011 in gold… pushing prices past $2,100 with $2,200 an ounce in mind,” said Nicky Shiels, head of metals strategy at precious metals firm MKS Pump.
All that glitters is gold
Spot gold prices rose to a new record high of $2,110.8 an ounce on Monday before giving up some of their gains. It is currently trading at $2,084.59.
On Friday, gold touched $2,075.09 to surpass a record intraday high of $2,072.5 set on August 7, 2020, according to LSEG data.
Bart Melek, head of commodity strategies at TD Securities, expects gold prices to average $2,100 in the second quarter of 2024, with aggressive central bank purchases acting as a major catalyst in boosting prices.
According to a recent study conducted by the World Gold Council, 24% of all central banks intend to increase their gold reserves In the next 12 months, as they become increasingly pessimistic about the US dollar as a reserve asset.
“This means the possibility of increased demand from the formal sector in the coming years,” Malak said.
He added that a potential policy pivot by the Fed in 2024 could also be on the cards. Low interest rates weaken the dollar, and a weak dollar makes gold cheaper for international buyers, increasing demand.
Gold prices in the past six months
On Friday, while Federal Reserve Chairman Jerome Powell backed away from expectations of larger interest rate cuts in the future, his comments indicated that the Fed may at least be raising interest rates for now.
“We believe the key factors supporting gold in 2024 will be interest rate cuts by the US Federal Reserve, a weak US dollar and rising levels of geopolitical tension,” Fitch Solutions’ BMI research unit said in a recent note.
