Gold market bulls are locking in bullion prices surging to fresh records, with a milestone of US$3,000 per ounce coming into focus, fired up by monetary easing by major central banks and a tight U.S. presidential election race.
Spot gold reached a historic high of US$2,589.59 on Monday and is on track for its strongest annual performance since 2020, with a rise of more than 24 per cent driven by safe-haven demand, owing to geopolitical and economic uncertainty, and robust central bank buying.
Gold could reach US$3,000 per ounce by mid-2025 and US$2,600 by the end of 2024 driven by U.S. interest-rate cuts, strong demand from exchange traded funds and over-the-counter physical demand, said Aakash Doshi, head of commodities, North America at Citi Research.
Earlier this month, the World Gold Council said global physically backed gold exchange traded funds saw a fourth consecutive month of inflows in August.
With the next Federal Reserve meeting approaching on Wednesday, markets are gripped by the likelihood of the first U.S. interest-rate cut since 2020. Low rates tend to be supportive for gold, which bears no interest.
Investors are currently pricing in a 35-per-cent chance of a 25-basis-point U.S. rate cut and a 65-per-cent chance of a 50-bps cut, the CME FedWatch tool showed as of late Monday.
If incoming data point to growth risks and weakness in the labour market, it will raise the chance of a 50-bps rate cut in either November or December, which would increase the tailwind for gold and pull forward the timing for attainment of US$3,000, said Peter A. Grant, vice-president and senior metals strategist at Zaner Metals.
Interest-rate cuts from major central banks are well under way, with the European Central Bank on Thursday delivering its second quarter-point cut of the year.
“We’re also evaluating other factors stirring up demand from the Western investor, including the upcoming U.S. election arguably adding to the uncertainty and gold serving as a hedge against immediate event risks,” said Joseph Cavatoni, market strategist at World Gold Council.
The upcoming Nov. 5 presidential election could boost gold prices as potential market volatility may drive investors toward safe-haven gold.
Attaining the US$3,000-per-ounce target is possible, said Daniel Pavilonis, senior market strategist at RJO Futures, adding that the scenario could be driven by political unrest following elections.
Investment banks and analysts have turned increasingly bullish on gold, with Wall Street bank Goldman Sachs showing the highest confidence in near-term upside in gold, which remains its preferred hedge against geopolitical and financial risks.
Australia’s Macquarie raised its gold price forecasts this week and is now looking for a quarter average cyclical peak in the first quarter next year of US$2,600 per ounce, with potential for a spike toward US$3,000.
“While the backdrop of challenged developed market fiscal outlooks remains structurally positive for gold, a lot is arguably already in the price, with the potential for cyclical headwinds to emerge later next year,” analysts at Macquarie said.
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