According to industry analysts, gold prices will rise to record highs above $2,000 per ounce this year, albeit with some turbulence, as the United States slows and eventually stops raising interest rates.
Spot gold prices have risen above $1,900 per ounce, up about 18% since early November, as inflationary pressures ease and markets anticipate less aggressive monetary policy from the United States Federal Reserve.
Rapidly rising interest rates slashed gold prices last year, sending them as low as $1,613.60 in September from a high of $2,069.89 in March – just shy of a record high in 2020.
Higher interest rates boosted bond returns, making non-yielding gold less appealing to financial investors, and pushed the dollar to its highest level in 20 years, making dollar-priced gold more expensive for many buyers. ,
The weakening of the US dollar and bond yields “will become macro tailwinds for the yellow metal, pushing gold above $2,000/oz in the coming months,” according to Bank of America analysts.
With the dollar and bonds under less pressure, investors are likely to buy bullion as a hedge against inflation and economic turbulence, according to WisdomTree analyst Nitesh Shah, who added that prices could easily rise above $2,100 per ounce by year’s end.
Gold has traditionally been regarded as a secure medium for storing wealth. “There is a high risk of central banks overdoing it and pushing their economies into recession,” Shah said.
Speculators who bet on gold prices falling in November have amassed a net long position in COMEX futures worth $16 billion, helping to push up prices.
According to the World Gold Council, central banks purchased more gold in the first nine months of 2022 than in any other year in the previous half-century.
Retail demand for gold bars and coins should remain strong, boosted by a rebound in economic growth in China, the world’s largest consumer market, according to ANZ analysts.
Analysts believe gold has gone too far too fast in the short term and needs to correct lower.
“Should prices fall from current levels to the $1,870–1,900 an ounce range, we expect the (upward) trend to reverse,” the bank said, adding that if gold falls below $1,800, it could slip to $1,730.
(Adapted from LiveMint.com)