(TBTCO) – Gold prices set a new record for the second consecutive time in the trading session on December 4, suddenly skyrocketing to 2,111 USD/ounce before paring the increase to nearly 2,100 USD/ounce, amid a bullion fever. globally seems likely to continue to increase.
|The recent decline in the dollar has added new impetus to the year-long bullion rally. Photo: Bloomberg
The falling dollar creates more momentum for gold prices to increase
Gold prices have risen to an all-time high, boosted by a decline in the US dollar as traders increased bets that the US Federal Reserve (FED) will cut interest rates next year. next.
According to Refinitiv data, during the trading session on December 4, gold prices increased by 2% to 2,111 USD/ounce, the highest level ever, before falling to 2,084.59 USD/ounce.
Previously, last Friday, December 1, the gold price also touched 2,075.09 USD, surpassing the record high of 2,072.5 USD achieved on August 7, 2020, when the virus pandemic Corona virus is hitting the US economy harder than other parts of the world, causing investors to buy gold bars.
|BMI, the research unit of Fitch Solutions, said: “We believe the key factors driving gold prices in 2024 will be FED interest rate cuts, a weaker US dollar and levels of geopolitical tensions. politics is on the rise.”
Gold prices have risen for two consecutive months as the Israeli-Palestinian conflict boosted demand for safe-haven assets, while expectations of interest rate cuts provided further support. Gold tends to perform well during times of economic and geopolitical uncertainty due to its status as a reliable store of value.
“The predicted decline in both the Dollar and interest rates in 2024 is the main driver for gold prices,” said Heng Koon How – Director of Strategy, Market Research and Global Economics at UOB. He estimates gold prices could reach $2,200 by the end of 2024.
Similarly, another analyst is also bullish on the outlook for bullion.
“Leverage on gold this time is less than in 2011, pushing the price above $2,100 and is expected to decline,” said Nicky Shiels, head of metals strategy at precious metals firm MKS PAMP. is 2,200 USD/ounce”.
Bart Melek, head of commodity strategy at TD Securities, expects gold prices to average $2,100 in the second quarter of 2024, with strong central bank buying acting as a catalyst main driver of prices.
Gold prices are expected to remain above $2,000 next year
According to a recent survey by the World Gold Council, 24% of central banks intend to increase their gold reserves in the next 12 months, as they become increasingly pessimistic about the US Dollar as a reserve asset. “This means there could be higher demand from the formal sector in the coming years,” Melek said.
He also added that the possibility of a policy pivot by the FED in 2024 could also be considered. Lower interest rates tend to weaken the dollar, and a softer dollar makes gold cheaper for international buyers, thus boosting demand.
|Spot gold prices rose to a new record high of $2,110.80 an ounce on Monday before falling to nearly $2,100 an ounce. Photo: Reuters
In fact, bullion’s latest rally was driven by a 3.2% decline in the dollar against a basket of six other currencies since early November – slightly above its lows. in 4 months – due to increasing investor confidence that the FED will soon reduce borrowing costs next year.
Gold’s move higher has contributed to a strong rally since last November driven by rampant buying activity by some central banks with record net buying volumes of up to 800%. tons from the beginning of the year through September, plus geopolitical tensions due to conflicts in Ukraine, Israel and Gaza.
|Gold prices are on track to reach new highs next year and could remain above $2,000, analysts say, due to geopolitical instability, a possibly weaker US dollar and the possibility of interest rate cuts. Fed rate.
That demand has helped the precious metal rally despite rising real interest rates for most of the past year – something that typically reduces demand for non-yielding gold.
Metals Daily chief executive Ross Norman said gold’s latest price rise was largely due to speculative flows from futures traders as market conditions cooled. Bulls are currently touting chart targets at $2,240 and $2,400.
The recent decline in government bond yields, as investors bet that interest rates have peaked and will soon begin to fall, has added impetus to gold’s rise.
Market pricing for an early and aggressive rate cut is clearly positive for non-yielding gold, with futures now showing a 59% chance of a US rate cut at the start of the month March 2024. Additionally, markets are assessing an 80% chance that the ECB will ease policy by March next year, although some ECB members have dismissed such prospects.
Last Friday, Fed Chairman Jay Powell also warned that the US central bank could raise interest rates further but added that that policy was within a “limited scope”.
However, some less optimistic investors have warned that gold may struggle to hold gains and trade steadily above the $2,075/ounce mark unless more sustained buying comes from more participants. more market.
Marcus Garvey – head of commodity strategy at Macquarie sees $2,250/ounce as the realistic price if inflation continues to decline in the US. “The key to achieving a more sustained breakout could include a return to ETF (exchange-traded fund) buying, which has largely not happened yet,” he said./.