- Gold hits a new record at $2,077.84 after surpassing the August 2020 intraday high of $2,072.5 on Friday
- Analysts believe gold prices could reach $2,100 next year.
- Gold prices are expected to remain above the $2,000 level next year as geopolitical uncertainty boosts safe-haven demand.
- A likely weaker U.S. dollar will also increase the attractiveness of gold at the greenback price for holders of other currencies.
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Gold prices hit a record high for the second day in a row on Monday – but the global rush for bullion won't be ending any time soon.
Gold prices are on track to hit new highs next year and are expected to stay above $2,000, buoyed by geopolitical uncertainty, a likely weaker US dollar and possible interest rate cuts.
Prices for the yellow metal have risen for two straight months as the Israeli-Palestinian conflict boosted demand for the safe haven and expectations of interest rate cuts provided further support.
“We believe the main factors that will boost gold in 2024 will be interest rate cuts by the US Federal Reserve, a weaker US dollar and high levels of geopolitical tensions,” BMI, a research unit of Fitch Solutions, said in a current announcement.
Because of its status as a reliable store of value, gold tends to perform well during times of economic and geopolitical uncertainty.
According to LSEG data, spot gold prices rose to $2,077.64 an ounce on Monday after reaching $2,075.09 on Friday, surpassing their intraday record high of $2,072.5 on August 7 2020. Analysts expect them to rise even further.
Bart Melek, head of commodity strategies at TD Securities, expects gold prices to average $2,100 in the second quarter of 2024, with heavy central bank buying serving as a key catalyst for the price rise.
$2100 is most likely…within the next quarter, even sooner.
Nicky Shiels
Head of metal strategy at MKS PAMP
According to a recent survey by the World Gold Council, 24% of all 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 currency.
“This potentially means higher demand from the public sector in the coming years,” Melek said.
A possible change in the Fed's monetary policy course in 2024 is also conceivable, he added. Lower interest rates tend to weaken the dollar, and a weaker dollar makes gold cheaper for international buyers, leading to higher demand.
See grafic…
Gold prices in the last six months
The Fed began its steady rate hikes in March 2022 as inflation reached its highest level in 40 years, reducing gold's appeal.
Higher interest rates hurt demand for gold, which doesn't pay interest, as assets like bonds become more lucrative due to their higher yield.
As recently as November 29, Fed Governor Christopher Waller said he could envision policy easing if inflation data continues to ease over the next three to five months, leading analysts to predict a rise in gold prices.
“The $2,100 level will most likely fall next quarter, even sooner,” said Nicky Shiels, head of metals strategy at precious metals firm MKS PAMP.
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