Gold Surges Mightily

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(Discern Reporter)—Gold prices reached a new record on Monday, marking a second consecutive month of gains as the global demand for bullion continues to surge. Spot prices touched $2,100, and analysts predict that gold could maintain its momentum, potentially staying above $2,000 levels next year. Geopolitical uncertainty, a probable weaker U.S. dollar, and potential interest rate cuts are cited as factors supporting the positive outlook for gold.

The ongoing Israel-Palestinian conflict has contributed to increased demand for gold as a safe-haven asset, while expectations of interest rate cuts further bolster the precious metal. Gold has historically performed well during periods of economic and geopolitical uncertainty, given its reputation as a reliable store of value.

Heng Koon How, UOB’s Head of Markets Strategy, Global Economics and Markets Research, anticipates a retreat in both the USD and interest rates throughout 2024, identifying these as key drivers for gold. He estimates that gold prices could potentially reach up to $2,200 by the end of 2024.

Nicky Shiels, head of metals strategy at MKS PAMP, is similarly optimistic about the outlook for gold, noting that there is less leverage this time compared to 2011, suggesting the potential for prices to surpass $2,100 and reach $2,200 per ounce.

Spot gold prices reached a new high of $2,110.8 per ounce on Monday before retracing some gains, currently trading at $2,084.59. Bart Melek, head of commodity strategies at TD Securities, foresees gold prices averaging $2,100 in the second quarter of 2024. He identifies strong central bank purchases as a catalyst supporting prices, with 24% of central banks planning to increase their gold reserves in the next year, expressing growing pessimism about the U.S. dollar as a reserve asset.

Melek also highlights a potential policy shift by the Fed in 2024, suggesting that lower interest rates could weaken the dollar, making gold more attractive to international buyers. The Fed’s gradual rate hikes, initiated in March 2022, aimed at addressing rising inflation, had initially diminished gold’s appeal. However, Fed Governor Christopher Waller’s recent comments about easing policy if inflation eases over the next few months have fueled expectations of a spike in gold prices.

Despite Fed Chairman Jerome Powell’s pushback on aggressive interest rate cuts, indications suggest that the Fed may, at least for now, be done with hiking rates. BMI, a Fitch Solutions research unit, believes that interest rate cuts by the U.S. Fed, a weaker U.S. dollar, and ongoing geopolitical tension will be the main factors supporting gold in 2024.

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