Gold at its best: how high will its value go?

23 Eylül 2024

Today’s market analysis on behalf of Antonio Ernesto Di Giacomo – Senior Market Analyst at XS.com

On September 20, 2024, gold reached a new historic high, hitting an impressive $2,625 per ounce. This surge has been driven by increasing demand for a haven amid a climate of high geopolitical and economic uncertainty. Additionally, gold is on track to record its best annual performance since 2020, with accumulated growth exceeding 27% so far in 2024. Investors view this precious metal as protection against global risks, supported by sustained purchases from central banks.

The gold market remains dominated by a bullish sentiment. Many analysts predict that the metal will continue rising, reaching the $3,000 per ounce level soon. Key factors supporting this expectation include the monetary easing policies adopted by the world’s major central banks. Furthermore, a closely contested U.S. presidential election looms, adding uncertainty and reinforcing the demand for safe-haven assets like gold.

A recent U.S. economic policy event was the Federal Reserve’s interest rate cut. The central bank reduced the interest rate by 50 basis points, bringing it down to 5%, marking the start of the first monetary easing cycle in the United States since 2020. This move aims to stimulate the economy but has also significantly affected financial markets, making gold an attractive investment option.

Historically, lower interest rates have benefitted gold, as the metal does not generate interest and, therefore, becomes more competitive compared to other interest-bearing assets like bonds. In a low-interest-rate environment, investors tend to seek assets that preserve value against potential currency devaluation, further boosting gold demand.

For 2025, analysts anticipate that gold prices could surpass $3,000 per ounce, while by the end of 2024, they are expected to reach $2,700. This forecast is supported by several factors: continued interest rate cuts by the Fed, strong off-exchange physical demand, and growing interest in exchange-traded funds (ETFs) backed by gold. Everything indicates that this metal will remain a strategic investment in the coming years.

In conclusion, gold is in a clear upward trend, with prices reaching all-time highs and projections suggesting this trend will continue. The key drivers of this growth are geopolitical uncertainty, monetary easing by major central banks, and increasing physical and financial demand. With an uncertain economic and political future, gold remains a safe haven, and many investors are turning to it as protection against potential turbulence in the years ahead.

 

Zaid Barem / YMM