Gold Surpasses $2,100, Setting New Records with Analysts Bullish on Further Gains
Date Issued – 4th December 2023
Author – Emmanuel Baiden – Senior Research Analyst
Gold prices achieved a historic milestone on Monday, surging past $2,100 for a second consecutive day, signalling a sustained global demand for the precious metal.
Analysts anticipate the upward trajectory to persist, projecting gold to maintain levels above $2,000, driven by geopolitical uncertainties, expectations of a weakened U.S. dollar, and potential interest rate cuts.
Factors Driving Gold's Rally
The yellow metal's ascent is attributed to a combination of factors, including heightened geopolitical tensions, exemplified by the Israel-Palestinian conflict, fostering demand for gold as a safe-haven asset.
Additionally, expectations of interest rate cuts have further bolstered gold's appeal, as it traditionally performs well during periods of economic and geopolitical uncertainty due to its reputation as a reliable store of value.
Analyst Projections
Analysts foresee gold prices reaching new highs in the coming year, maintaining a bullish outlook. Heng Koon How, Head of Markets Strategy, Global Economics, and Markets Research at UOB, emphasized the positive drivers for gold, anticipating a retreat in both the U.S. dollar and interest rates throughout 2024. He projected gold prices could potentially reach up to $2,200 by the end of 2024.
Bullish Predictions and Central Bank Influence
Bart Melek, Head of Commodity Strategies at TD Securities, expects gold prices to average $2,100 in the second quarter of 2024. Notably, central banks play a pivotal role in driving gold prices, with strong central bank purchases identified as a significant catalyst. A survey by the World Gold Council revealed that 24% of central banks plan to increase their gold reserves in the next 12 months, reflecting growing scepticism about the U.S. dollar as a reserve asset.
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Market Dynamics and Fed Policy Impact
A potential policy pivot by the Federal Reserve in 2024 is seen as a contributing factor to gold's continued ascent. Lower interest rates, often associated with a softer dollar, make gold more affordable for international buyers, consequently boosting demand.
Analysts underscore the interplay of market dynamics and Fed policies as influential elements in shaping the future trajectory of gold prices.
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[Disclaimer: This newsletter provides financial insights for informational purposes only. It does not constitute financial advice or recommendations for investment decisions.]
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