In 2024, the performance of gold has outperformed the broader US stock market, with the price of gold consistently hitting new highs. Some analysts believe that with the increasing global instability and the possibility of a quick rate cut by the Federal Reserve, the price of gold will continue to set new records. It is possible that the price of gold could reach $3,000 per ounce next year.
The price of gold in 2024 has risen by about 21%, while the S&P 500 index has risen by 16%.
According to a report by CNBC on August 19th, quoting data from FactSet, spot gold held steady at a record high of $2508.14 per ounce set in the previous trading day, while US gold futures surged 0.16% during the Asian session on Monday, August 19th, setting a new record of $2540.8 per ounce, continuing the upward trend from Friday, August 16th.
The report cited Sabrin Chowdhury, director of commodities analysis at BMI, as saying, “2024 is a year in which gold should reach multiple highs.” She mentioned the attractiveness of gold as a safe-haven asset.
During times of economic and geopolitical uncertainty, gold often performs well because it is seen as a “reliable store of value.” Chowdhury believes that the current “uncertainty is at its peak,” pointing to some significant events in 2024 such as major elections, Ukraine’s recent incursion into Russian territory, and escalating tensions in the Middle East.
A report from the US Department of Labor on August 14th showed that the Consumer Price Index (CPI) for July rose by 2.9% year-on-year, reaching the lowest level since March 2021. This latest inflation data, coupled with the employment data for July, increases the likelihood of a rate cut by the Federal Reserve in September. A rate cut would be another factor driving up the price of gold.
Lower interest rates reduce the opportunity cost of buying gold, making it more attractive compared to interest-bearing assets like government bonds.
Analysts at BMI stated that once the Federal Reserve starts cutting rates (likely next month), gold could reach $2,700 per ounce. Other analysts share a similar bullish sentiment.
Lowering interest rates often weakens the US dollar, making it cheaper for international buyers to purchase gold, thus boosting demand.
Analysts at Citibank stated in a report on Monday that the sentiment of gold investors seems to be bullish in the next three to six months.
They added that they believe the target price for gold by mid-2025 is $3,000 per ounce, with the average price for the fourth quarter of this year expected to be $2,550 per ounce.
Patrick Yip, Senior Director of Business Development at the American Precious Metals Exchange, told CBS Money Watch at the end of last month that if geopolitical uncertainties, rate cuts, or increased gold purchases by central banks continue, gold could potentially reach $3,000 per ounce as early as next year.
While experts can predict future gold prices by examining key indicators, the unpredictable changes in the many variables that affect gold value make accurate predictions difficult. Many gold experts recommend keeping the investment proportion of gold and other precious metals within one’s portfolio below 10% due to potential short-term fluctuations.
Traders will also be closely watching the annual Economic Policy Symposium in Jackson Hole this week, where Federal Reserve Chairman Jerome Powell will give a speech that could provide further clarity on interest rate prospects.