An employee handles one kilogram of gold bars at the YLG Bullion International Co. headquarters in Bangkok, Thailand, Friday, December 22, 2023.
Charlene Tirasupa | Bloomberg | Getty Images
Gold prices continue to hit new highs, with analysts predicting they will hit $3,000 an ounce next year as the Federal Reserve meeting approaches.
spot gold FactSet data showed that gold futures prices were stable at the previous session’s all-time high of $2,508.14 an ounce, while U.S. gold futures rose 0.16% on Monday in Asia to hit a new record of $2,540.8 an ounce, extending gains from last Friday.
“Gold prices are expected to hit multiple highs in 2024,” said Sabrin Chowdhury, head of commodities analysis at BMI, noting gold’s appeal as a safe-haven asset.
“Gold thrives on uncertainty…(and) uncertainty is at its peak,” she added, referring to 2024 being an election year, Ukraine’s recent invasion of Russia and rising tensions in the Middle East.
Israel and Iran appear to be on the verge of direct conflict after Hamas political leader Ismail Haniyeh was assassinated in Tehran earlier this month and Iran vowed to retaliate. The Israeli army has been put on high alert The United States dispatched an aircraft carrier strike group and missile submarines Travel to the area to support the defense of its allies.
Another factor driving gold prices higher is the increased likelihood of a rate cut by the Federal Reserve in September. The July Fed meeting boosted investor confidence that a rate cut next month is “on the table.”
“Once the Fed starts cutting interest rates, likely next month, gold prices could reach $2,700 an ounce,” analysts at BMI said. Other analysts shared a similar bullish sentiment.
Lower interest rates reduce the opportunity cost of buying gold, making it more attractive relative to interest-bearing assets such as U.S. Treasuries, which compete with gold as a safe haven.
Lower interest rates are also putting pressure on the dollar, making dollar-denominated gold bars attractive to holders of other currencies.
Citi analysts said in a report on Monday that gold investor sentiment appears to be on the rise in three to six months’ time.
The bank added that they expect to target $3,000 per ounce by mid-2025, with an average price forecast of $2,550 per ounce in the fourth quarter.
Traders will also be eyeing this week’s annual economic policy symposium in Jackson Hole, where Federal Reserve Chairman Jerome Powell will speak, which could provide more clarity on the outlook for interest rates.
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