Will the price of gold reach $3000?
Geopolitical tensions have boosted demand for the yellow metal, supported by the safe-haven appeal of bullion, as prices on Monday hit a record close, with the most active June contract for gold futures rising 0.37 percent to settle at $2,383 an ounce.
Demand for gold grew amid escalating tensions in the Middle East after the attack launched by Iran on Israel with missiles and drones at the weekend, as markets awaited a possible Israeli response to the attack.
Analysts at the US bank “Citi” point out that gold, which maintains its value as a hedge against inflation, tends to perform well in periods of economic uncertainty when investors move away from riskier assets such as stocks.
Akash Doshi, head of North American commodities research at Citi, said: “We expect the price of gold to reach $3,000 per ounce in the next six to 18 months.”
In turn, Goldman Sachs indicated that the gold market is an “unwavering bull market” and adjusted its target price for the yellow metal from $2,300 per ounce to $2,700 by the end of the year.
Speaking to the “Eqtisad Sky News Arabia” website, Mazen Salhab, chief market strategist at BDSwiss MENA, said: “In a striking performance, at least so far, gold will rise by 15 percent in 2024, achieving gains of 10 percent in one month, with three consecutive months.” Strong gains and the best monthly performance in almost four years.”
Such gains may be inconsistent with the traditional view that has prevailed for decades, which is that the US dollar rises and gold falls and vice versa, but the numbers show that the US dollar index is already up 5 percent in 2024, according to Salhab, who believes that the war is not a direct influencing factor as many believe. (The war is an indirect factor with its consequences on energy and supply markets and thus its impact on inflation and central bank decisions.) Rather, what has lifted gold strongly in the last few months are three main factors:
– Market pricing to reduce interest rates in America and the rest of the developed economies (low interest rates benefit gold more and give it additional value when compared with the return on a fixed deposit).
– American inflation, which has remained stubborn and high at more than 3 percent, and with oil remaining approximately 20 percent high in 2024, we can say that inflation may not decline quickly, and buying gold is the best hedge against rising inflation, especially in emerging economies and developing markets.
– Central banks that continue to buy, even if gold purchase numbers decline to 1,037 tons in 2023 compared to 1,082 tons in 2022, according to the World Gold Council. At the forefront of the countries that bought gold are China and Singapore.
But what will push gold to a wave of significant increases is if there is a sudden retaliatory response followed by an Iranian response, and this scenario leads us to expect a wave of buying in safe havens in the current quarter that may reach levels of $2,550 per ounce, according to market analyst Azzam, who confirmed that safe havens are not the only reason, Rather, it is the state of the US economy and future interest trends, as gold, which maintains its value as a hedge against inflation, tends to perform well in periods of economic uncertainty when investors move away from risk assets.
A senior financial markets analyst at Equity Group added: “Gold prices usually have an inverse relationship with interest rates. As interest rates decline, gold becomes more attractive compared to fixed income assets such as bonds, which would generate weaker returns, and US inflation remains a topic of discussion, as the March reading showed that inflation remains stubborn, opening the way that the markets may believe that a two-time rate cut is necessary. In 2024, it may be the best direction for the Fed.”
With the scenario of high inflation and the Fed’s tendency to reduce interest rates less, or even with inflation slowing and the Fed’s tendency to reduce rates further, gold will remain a good investment tool as a cover for high inflation or a good investment asset in light of low interest rates, so it may be a scenario that carries more increases, but I do not We are likely to see rises above the $2,550-$2,600 per ounce range in 2024, as all of this seemed to be expected by the markets, according to Azzam.
