Spot gold prices rose to a new record high of $2,110.8 an ounce on Monday before giving up some gains.
Prices of the yellow metal have risen for two consecutive months as demand for safe-haven assets increased due to the Israeli-Palestinian conflict.
Gold prices are expected to remain above the $2,000 level next year.
Gold prices hit a new record for the second consecutive day on Monday – with spot prices hitting $2,100 as the global rush for the bullion looks set to continue.
Citing geopolitical uncertainty, a potentially weak US dollar and possible interest rate cuts, analysts said gold prices are set to hit new highs next year and could remain above the $2,000 level.
Prices for the yellow metal have risen for two consecutive months as demand for safe-haven assets increased due to the Israeli-Palestinian conflict, while expectations of interest rate cuts provided further support. Gold performs well during periods of economic and geopolitical uncertainty due to its status as a reliable store of value.
“The anticipated decline in both the USD and interest rates in 2024 are key positive drivers for gold,” Heng Koon How, head of market strategy, global economics and markets research at UOB, told CNBC via email. He estimates that gold prices could reach $2,200 by the end of 2024.
Similarly, another analyst is bullish on the bullion outlook.
“There is less upside in gold this time than in 2011… taking prices to $2,100 and a forecast of $2,200 an ounce,” said Nicky Shiels, head of metals strategy at precious metals firm MKS PAMP.
all that glitters is gold
Spot gold prices rose to a new record high of $2,110.8 an ounce on Monday before giving up some gains. It is currently trading at $2,084.59.
According to LSEG data, gold touched $2,075.09 on Friday, surpassing the precious intraday record of $2,072.5 set on August 7, 2020.
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 purchasing acting as a key catalyst in pushing prices higher.
According to a recent survey by the World Gold Council, 24% of all central banks intend to increase their gold reserves over the next 12 months, as they are becoming pessimistic about the US dollar as a reserve asset.
“This means there will potentially be more demand from the official sector in the coming years,” Melek said.
He said a possible policy turn by the Fed in 2024 could also be on the cards. Low interest rates weaken the dollar and a soft dollar makes gold cheaper for international buyers thereby increasing demand.
The Fed has launched a series of rate hikes in March 2022 as inflation reaches its highest level in 40 years, reducing gold’s appeal.
Higher interest rates hurt demand for gold, which pays no interest, as assets such as bonds become more attractive due to their higher yields.
On November 29, Fed Governor Christopher Waller said he envisioned easing policy if inflation data continued to soften over the next three to five months, leading analysts to expect gold prices to rise.
On Friday, while Fed Chairman Jerome Powell downplayed expectations of further aggressive interest rate cuts, his comments hinted that the Fed may hold off on hikes, at least for now.
“We believe the main drivers of a gold rally in 2024 will be interest rate cuts by the US Fed, a weak US dollar and high levels of geopolitical tensions,” Fitch Solutions research unit BMI said in a recent note.