- Gold hits new record of $2,077.84 after surpassing August 2020 intraday high of $2,072.5 on Friday
- Analysts expect spot gold prices next year could hit $2,100.
- Gold prices are expected to remain above $2,000 levels next year as geopolitical uncertainty drives demand for safe-haven assets.
- A likely weaker U.S. dollar will also boost greenback-priced gold’s appeal among holders of other currencies.
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Gold prices notched a record high for a second day in a row Monday — but the global rush for bullion is not about to stop anytime soon.
Gold prices are on course to hit fresh highs next year and are expected to remain above $2,000 levels, buoyed by geopolitical uncertainty, a likely weaker U.S. dollar and possible interest rate cuts.
Prices of the yellow metal have risen for two consecutive months with the Israel-Palestinian conflict boosting demand for the safe-haven asset, while expectations of interest rate cuts have provided further support.
“We believe the main factors buoying gold in 2024 will be interest rate cuts by the U.S. Fed, a weaker U.S. dollar and high levels of geopolitical tension,” BMI, a Fitch Solutions research unit, said in a recent note.
Gold tends to perform well during periods of economic and geopolitical uncertainty due to its status as a reliable store of value.
Spot gold prices rose to $2,077.64 per ounce Monday after hitting $2,075.09 Friday to surpass their record intraday high of $2,072.5 on Aug. 7, 2020, according to LSEG data. Analysts say they are about to head even higher.
Bart Melek, head of commodity strategies at TD Securities, expects gold prices to average $2,100 in the second quarter of 2024, with strong central bank purchases acting as a key catalyst in boosting prices.
$2100 is more likely than not …. within the next quarter, even sooner.
head of metals strategy at MKS PAMP
According to a recent survey by the World Gold Council, 24% of all central banks intend to increase their gold reserves in the next 12 months, as they increasingly grow pessimistic about the U.S. dollar as a reserve asset.
“This means potentially higher demand from the official sector in the years to come,” Melek said.
A possible policy pivot by the Fed in 2024 could also be on the cards, he added. Lower interest rates tend to weaken the dollar and a softer dollar makes gold cheaper for international buyers thus driving up demand.
Gold prices in the past six months
The Fed started its steady stream of rate hikes in March 2022 as inflation climbed to its highest in 40 years, diminishing gold’s appeal.
Higher interest rates hurt demand for gold, which does not pay any interest, as assets such as bonds become more lucrative due to their higher yields.
As recently as Nov. 29, Fed Governor Christopher Waller said he could envision easing policy if inflation data continues to ease over the next three to five months, prompting analysts to forecast a spike in gold prices.
“$2100 is more likely than not to fall within the next quarter, even sooner,” said Nicky Shiels, head of metals strategy at precious metals firm MKS PAMP.