The price of gold surged to a new record high of $2,626 per ounce on Friday, driven by US rate cuts that enhanced the metal’s safe-haven appeal. Analysts believe that gold is in a strong position to test higher levels with the next targets ranging from $2,649.43 to $2,660.90. The opportunity cost of holding non-yielding assets like gold is reduced with the prospects of further interest rate cuts, making gold more attractive during economic uncertainty.
According to Rania Gule, a senior market analyst, the price hike is influenced by economic and geopolitical factors, including the weakening dollar and ongoing global tensions. Despite offering no direct yield, gold remains appealing to investors looking to safeguard their wealth amidst diminishing returns from other assets. Goldman Sachs Research forecasts a price of $2,700 by early next year, driven by interest rate cuts, gold purchases by emerging market central banks, potential financial sanctions, or concerns about the US debt burden.
Central banks have been buying gold at a triple the previous rate since Russia’s invasion of Ukraine in 2022, with expectations of continued buying amid concerns about US financial sanctions and the growing US sovereign debt burden. Gold is seen as a preferred near-term commodity by strategists as a hedge against geopolitical and financial risks, with potential upside from central bank purchases, impending Fed cuts, and geopolitical shocks. As the dollar weakens, non-dollar investors are increasingly finding gold more attractive, supporting the metal’s rally.
Gold has gained over 26% so far in 2024, driven by geopolitical tensions in the Middle East and Europe that benefit the metal. Analysts believe that further rate cuts by the Fed could bring Western investors back into the gold market, offering significant value as a portfolio hedge against tariffs, Fed subordination risk, and debt sustainability fears. While gold is well-positioned to continue its upward trend, market developments, changes in monetary policy, or de-escalation of geopolitical tensions could trigger price corrections, so investors are advised to remain cautious while taking advantage of opportunities during gold price rises.
In conclusion, gold has reached new record highs supported by US rate cuts and geopolitical tensions, with analysts predicting further upside potential driven by central bank purchases, Fed cuts, and geopolitical shocks. The weakening dollar and ongoing economic and geopolitical concerns are contributing to gold’s appeal as a safe-haven asset despite offering no direct yield. Investors are advised to stay vigilant for potential market developments that could trigger price corrections while taking advantage of opportunities during gold price rises.
