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For thousands of years, gold has fascinated humanity with its rarity, beauty and intrinsic value. This precious metal, a symbol of wealth and power, continues to exert an irresistible attraction on investors, central banks and individuals. Today, its appeal has not diminished, quite the contrary, as evidenced by the recent surge in its price on international markets.
The yellow metal has just reached a new all-time high. On Tuesday, gold rose to $2,457.81 per ounce, thus breaking the previous record set at the end of May last year. This outstanding performance is part of a continuing upward trend, which has increased by 18% since the beginning of the year.
Several factors combined to explain the stunning surge. Expectations of a cut in the key interest rate by the US Federal Reserve played a leading role. US inflation came in slightly below expectations in June, fuelling speculation about a possible rate cut and pushing gold prices above $2,400 an ounce.
The inverse relationship between gold prices and interest rates has once again been confirmed. In fact, when interest rates fall, gold becomes more attractive compared to fixed income investments. Investors currently expect the Federal Reserve to cut interest rates by about 75 basis points, or three cuts of 25 basis points each.
In addition to monetary policy, other factors also support the rise in gold prices. Large-scale purchases by central banks, especially China’s central bank, to bolster reserves have boosted demand. Ongoing geopolitical tensions have also strengthened gold’s status as a safe-haven asset.
An interesting phenomenon is emerging in China as households turn to physical gold in the face of a local real estate and stock market downturn. The trend, highlighted by experts such as Bank of America, is driving strong demand for bars and coins.
The outlook for gold looks promising. Stephen Innes of SPI Asset Management shares Goldman’s bullish view, predicting prices to reach $2,700 an ounce by the end of this year. UBS expects physical demand to increase in late 2024-early 2025, providing a solid foundation for a continued upward trend.
The coming months will be crucial for the evolution of gold prices. The Federal Reserve’s Monetary Policy Committee meetings in August and September, as well as the U.S. election in November, will be closely watched by market participants.
Some analysts are even more aggressive in their predictions. Citigroup is even considering the possibility of gold prices rising to $3,000 an ounce within six to 18 months, citing strong physical demand and gold’s appeal as a hedge against geopolitical risks.
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