Gold has been breaking one record after another this year, with analysts expecting more record highs as the next Federal Reserve meeting approaches, which is expected to open the monetary policy easing cycle.
The spot price of gold is maintained at last session’s record high of $2,508.14 an ounceaccording to FactSet data, while U.S. gold futures jumped 0.16 percent to hit a fresh record of $2,542.8 an ounce on Monday, extending Friday’s gains.
“2024 is the year gold will hit multiple highs,” Sabrin Chowdhury, head of commodities analysis at BMI, told CNBC, highlighting gold’s role as a safe-haven investment.
Gold thrives on uncertainty
“Gold thrives on uncertainty… [και] uncertainty is at its peak,” he added, referring to the election contest in the United States, Ukraine’s recent invasion of Russia and escalating tensions in the Middle East.
Israel and Iran are on the brink of conflict after Iran vowed to retaliate following the assassination of Hamas political leader Ismail Haniya in Tehran. Israel has put its military on high alert and the US has sent reinforcements to the region to support its ally’s defenses.
Another factor driving gold prices is the increasing chances of a Fed rate cut in September. July’s Fed meeting boosted investor confidence that a rate cut next month is “on the table.”
“Once the Fed starts cutting rates, likely next month, gold could reach $2,700 an ounce,” reports Sabrin Chowdhury. And she’s not the only one who shares this bullish view.
Lower interest rates reduce the opportunity cost of buying gold, making it more attractive than interest-bearing assets such as US Treasuries, which compete with gold as a safe haven. Lower interest rates also put pressure on the dollar, making gold, which is denominated in dollars, more attractive to holders of other currencies.
Citi analysts are even more bullish, saying gold looks poised for a three- to six-month rally.
The bank added that it sees a target of $3,000 an ounce by mid-2025 and a fourth-quarter average price forecast of $2,550 an ounce.
Traders are also turning their attention to the annual economic policy conference in Jackson Hole this week, which could provide more clarity on the outlook for interest rates, with Fed Chairman Jerome Powell expected to address the gathering.
Source: ot.gr
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