Market Views: Can gold prices hit $3,000 per ounce?
Gold's scorching rally in 2024 has pushed the precious metal to successive record highs, most recently touching $2,758.49 per troy ounce against a backdrop of heightened geopolitical tensions and shifting monetary policy expectations.
Recent profit-taking, however, combined with a strengthening US dollar and rising bond yields, has led to increased debate about the sustainability of the current rally.
The fundamental drivers behind gold's advance remain significant.
The Federal Reserve's shift toward an expected interest rate cutting cycle has enhanced the appeal assets like gold, while geopolitical risks from the Middle East situation and the upcoming US presidential election have boosted safe-haven demand.
Institutional interest has also played a key role, with hedge funds increasing their net-long positions and investors adding to exchange-traded fund holdings throughout the recent price advance.
As the market debates whether gold can reach $3,000 per troy ounce, AsianInvestor asked leading analysts and fund managers to assess the current market dynamics and share their outlook for gold prices in the coming months.
The following reponses have been edited for brevity and clarity.
Daniel Sullivan, head of global natural resources
Janus Henderson Investors
Gold has been a tradable metal as currency for over 3,000 years.
Few countries last more than a few hundred years, gold has had a place in trade and wealth management beyond all countries legally tendered paper money.
This year gold had gained 33% while many currencies are weakening against the US dollar.
Over the past five years this has been even more dramatic, with gold gaining 83% and many major currencies devaluing by -20% against the US dollar.
The disaster of war and economic collapse can see currencies lose all their value in a relatively short time (less than 10 years).
Central Banks are large owners of gold reserves, and gold has played an effective role for them in many past crisis events.
China has been steadily building their gold reserves in recent years. Gold is difficult to find in large quantities and needs specialist geological, metallurgical and engineering project expertise to produce new gold ounces for the market.
Gold is never going away, it will never be irrelevant, and it will always be useful for wealth preservation and to trade with clear real value.
We have observed many commodities re-rating in the last decade, gold is now on this path frequently setting new all-time high prices. An expectation of gold possibly trading towards $5,000 per ounce seems to be becoming possible.
Alex Chiu, senior strategist, ETF business
Value Partners
Geopolitical uncertainty has become one of the main drivers of the recent gold bull run, leading it to become one of the best-performing assets in 2024.
We forecast gold prices will continue to soar and reach $2,800 by the end of this year, extending its record-breaking price rally into 2025.
Recently, with the stronger-than-expected US economic data, the market expects the Fed rate cut to slow down, leading to expectations of a correction in gold prices.
However, we note that gold prices are more sensitive to structural demand and geopolitical risks than interest rate cuts, which explains the surge in gold prices to new records.
The increasing demand for gold ETFs and CME’s gold contracts in September reflect the optimism of institutions and hedge funds for gold.
We expect demand for gold will continue to be driven by its safe-haven properties as investors hedge against geopolitical uncertainties, including the US presidential election.
The deglobalisation and de-dollarisation trends have also contributed to the strong demand for gold.
Additionally, we expect central banks to continue to increase allocation in gold bullion as a reserve in the coming years, given the higher geopolitical, inflation, and market risks.
Wei Li, head of multi-asset investments, China
BNP Paribas
In the current softer cyclical environment, gold stands out as the commodity with promising near-term upside.
A key driver behind this strength is the sustained demand from emerging market central banks, which have been actively purchasing gold on the London over-the-counter (OTC) market since 2022.
We anticipate that these purchases will remain elevated, providing ongoing support for gold prices.
Additionally, the prospect of imminent Federal Reserve rate cuts is likely to reinvigorate Western capital flows into the gold market, a factor that has been largely absent during the sharp gold rally of the past two years.
As global interest rates gradually decline, the market has yet to fully account for the potential boost to Western ETFs backed by physical gold.
Furthermore, gold continues to offer significant hedging value for portfolios, particularly against geopolitical risks such as tariffs, concerns over Federal Reserve policy, and rising debt fears.
Gold prices could see a double-digit upside in the event of heightened financial sanctions, similar to the increase observed since 2021.
There is also potential for a similar price surge if US CDS (Credit Default Swap) spreads widen, reflecting growing concerns over US. debt levels.
Overall, gold remains a compelling asset in the near term, driven by both structural and cyclical factors.
Robin Tsui, APAC gold strategist
State Street Global Advisors
We do not expect a major pullback despite gold having rallied more than 30% year-to-date.
There are several reasons why gold continues to hit record-highs in 2024 and drawing more investors to the yellow metal.
As central banks and global investors needing to navigate against an increasingly complex geopolitical environment, robust central bank gold buying, and safe-haven demand fueled by the escalating tensions in the Middle East have aided gold’s rally this year.
Gold investment demands have been strengthened by the rising COMEX net long gold positions; possibility motivated by the expected increase in market volatility ahead of the US election.
As the European Central Bank and the Federal Reserve began their rate cut cycles, the return of net inflows into gold ETFs has been one of the key factors driving gold prices in recent months.
Retail physical gold demand has also remained resilient this year, supported by China and India, the world’s largest consumers of physical gold.
As the US election draws closer and with the ongoing geopolitical tensions, we expect the continued strong investment demand to be the key factor driving gold prices for the rest of the 2024.
Laura Cooper, head of macro credit and global investment strategist
Nuveen
The breathtaking rally in gold year-to-date extends the strong performance seen since late 2022.
Robust demand from China and speculative flows have largely underpinned the advance with ongoing central bank buying further bolstering the price trend.
With the move largely defying fundamentals of real rates and US dollar strength, the magnitude of ongoing advances derived from gold demand could be limited, in our view.
A bullish case remains, however, as the precious metal is poised to benefit as a preferred portfolio hedge against tail-risk global events.
An increasingly fragile geopolitical backdrop and US fiscal uncertainty bode well for gold to remain supported, putting a floor near current trading ranges.
The US election outcome will also play a material role in the dynamics driving the asset.
While fiscal deficits are likely to rise further regardless of the election outcome, the potential imposition of tariffs, renewed risk of inflationary forces, and preference for US dollar weakness under a Republican sweep could boost gold by more than alternative scenarios, in our view.
Alexandra Symeonidi, corporate credit analyst
William Blair
Gold prices have repeatedly hit record highs this year, surging 32% year-to-date. We see several factors at play as gold's stars align.
Major central banks have implemented rate cuts, and geopolitical tensions, particularly due to escalating conflicts in Europe and the Middle East, as well as the upcoming US election, have added a premium to gold's value.
On the physical side, although central bank gold purchases have slowed as of recently, they have been at historically high levels in the first half of this year.
India gold imports have also been increased significantly, somewhat offsetting the lower imports from China.
On the technical side, we also see increased investor interest with net long positioning reaching multi-year highs.
There are arguments both for and against a sustained rally in gold prices beyond the US elections, which could introduce short-term volatility.
We emphasise that ongoing geopolitical risks and economic uncertainty worldwide serves as a positive catalyst for gold prices.
However, current high price levels might desensitise physical demand, including consumer and central bank purchases, potentially preventing price spikes.