After gold’s latest rally to record highs, are sentiments still bullish enough to push it further? Some analysts think gold still offers great opportunity.
Gold Price Today
Gold prices rose to record highs earlier this week, benefiting from changing expectations surrounding U.S. interest rate cuts as well as increased safe haven demand.
Persistent geopolitical tensions in the Middle East and between Russia and Ukraine, coupled with a devastating earthquake in Taiwan, spurred safe haven plays into bullion and other precious metals.
Gold was further boosted by steep declines in the dollar, with the greenback falling to a one-week low, as Federal Reserve officials reiterated that the central bank was likely to cut interest rates in 2024, although they gave scant cues on the potential timing of the move.
“The gold price has generally responded positively to improved odds of a Fed pivot from tightening to pausing/easing,” said Imaru Casanova, portfolio manager of gold and precious metals strategies at VanEck, in a note.
“Historically, gold has performed well during periods of high inflation. If inflation/inflation expectations stay above the Fed’s target, we believe this would be gold positive.”
Another factor supporting the yellow metal over a longer period has been record buying from the official sector, with demand from central banks representing over 20% of total gold demand for the year in 2023.
At 09.05 ET (14.05 GMT), spot gold traded at $2,292.19 an ounce, just below the record high of $2,302.58 an ounce. Gold futures expiring in June traded at $2,312.15, after hitting a record high of $2,322.25 an ounce earlier this week.
Gold Price Forecast 2024
Further gains look likely, with Casanova seeing the potential for gold to climb above $2,500 an ounce.
“In recent years, rallies of this type have often been followed by periods of consolidation around an established, higher level, with the metal trading in a sideways pattern until a new catalyst emerges driving prices even higher,” he added.
“The return of investment demand, as evidenced by inflows into global gold bullion ETFs, could be that catalyst, with a potential to drive gold higher.”
Analysts at Bank of America Securities have largely agreed, committing to a $2,400/oz price estimate this year.
“Our base case 2024 year ahead view called for the first green in 2024 to be gold. A bullish flag pattern was confirmed in late October 2023 that estimated upside to $2145 and possibly $2360,” BofA said.
BofA noted that the longstanding positive relationship between gold prices and physically backed exchange traded funds (ETFs) has broken down, with assets under management at these vehicles declining.
However, “in our view, this is heavily influenced by continued apprehension over the direction of monetary policy. Yet, if the Fed ultimately starts cutting rates, investors should return to the market.”
Additionally, the central bank net purchases of 1,037 tonnes of gold in 2023 is more than double the pre-2022 annual average net purchases of about 500 tonnes of gold per year.
“This is an impressive trend, expected to continue in the longer-term,” added Casonova.
Bitcoin Vs Gold
Gold serves as a safe haven investment, protecting against inflation, geopolitical and financial risks while also enhancing portfolio diversification. Bitcoin, still in its early stages, appears to be able to offer some of these same benefits.
“However, one thing Bitcoin clearly lacks for now is the track record that gold has established over centuries as an asset of choice for investors worldwide,” Casanova said.
How To Invest in Gold
The most common way to invest in physical gold is to purchase gold bullion, commonly in the form of bars, ingots, or coins.
However, there are usually additional costs in owning gold this way, mostly in the form of safe storage – many investors keep their gold bullion with the bank safety deposit boxes or vaults, rather than at home.
A gold ETF allows you to invest in gold, without having to buy the physical gold assets. Some gold ETFs simply track the price movements of physical gold, whereas others may include shares in gold miners, or various gold-backed derivatives. They can be traded like stocks, making them liquid and easy to sell when required.
A gold unit trust is also a fund, which consists of gold-related assets and derivatives, but is more actively managed.
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