VanEck’s CEO highlighted that gold prices are not just experiencing a typical rally but are “reaching, bitcoin-like, for the sky.” This underscores the extraordinary performance of gold in the current market, fueled by concerns over inflation and government spending (ETF & Mutual Fund Manager | VanEck).
Gold prices have reached a new all-time high as growing anticipation of interest rate cuts by the US Federal Reserve has driven investors to increase their holdings of the precious metal. On Tuesday afternoon, the spot price of gold climbed to a record $2,531.60 (£1,943.83) per ounce, marking an increase of over 1% in just one day.
A standard gold bar, which typically weighs 400 troy ounces (12.4kg), is now valued at over $1 million. This surge in gold prices is largely attributed to the prospect of interest rate cuts by central banks, with the US Federal Reserve leading the way. Lower interest rates generally make bonds and stocks less attractive because they reduce the potential returns, prompting many investors to seek refuge in gold as a safer investment.
Gold prices hit new record ahead of expected interest rate cuts: Spot gold was trading at $2,255 an ounce late Tuesday morning. Gold prices and US interest rates tend to be inversely correlated By Harry Wise Updated:… https://t.co/lP4mdSGF7G #dailymail #money #moneymarkets
— WhatsNew2Day (@whatsn2day) August 20, 2024
Although gold’s practical uses are primarily limited to jewelry and certain electronics, it is widely regarded by investors as a safe haven during times of economic and geopolitical uncertainty. The ongoing conflicts in Ukraine and Gaza have contributed to the rise in gold prices over the past two years, even as US interest rates have increased to their highest levels in 23 years.
Since the end of 2019, gold prices have risen by two-thirds, with much of that gain occurring since March of this year. Prices have increased by more than 20% during this period, fueled by the growing expectation of interest rate cuts. Antonio Ernesto Di Giacomo, a senior market analyst at XS, noted that the recent surge in gold prices reflects a “rise in uncertainty and investors’ flight to safe havens” as well as the anticipation of Fed rate cuts.
“The historic rise in the price of gold above $2,500 per ounce reflects growing global economic uncertainty and investors’ continued search for safety,” Di Giacomo said. “With economic, geopolitical, and monetary factors driving this surge, gold is solidifying its position as a safe haven in times of volatility.”
The investment bank UBS has projected that gold prices could reach $2,600 per ounce by the end of 2024. As markets anticipate a 0.25 percentage point cut in the Fed’s target interest rate to between 5% and 5.25%, investors will be closely monitoring Federal Reserve Chair Jerome Powell’s upcoming speech at the Jackson Hole resort in Wyoming for any indications of potential rate cuts at the Fed’s next meeting on September 18.
Gold prices have been hitting new highs, and analysts expect more records to come, with some forecasting the metal to hit US $3,000/oz next year as the #USFed meeting draws closer. Click to access.
👉 https://t.co/yMjj7pqQxH#goldprices— Silver47 (@Silver47co) August 20, 2024
Other major central banks have already begun reducing interest rates, with the European Central Bank cutting rates in June and the Bank of England following suit earlier this month. The Bank of England’s reduction of the base rate to 5% is already resulting in lower home loan rates for some mortgage borrowers, with several of the UK’s largest lenders now offering fixed-rate deals below 4%.
Quotes
- Goldman Sachs analysts maintain a bullish outlook, predicting an average gold price of $2,133 per ounce for 2024. They attribute this to gold’s status as a safe-haven asset amid rising uncertainties, such as potential recessions and financial market stresses (CAPEX Trading).
- The World Bank has raised its forecast for 2024, predicting an average gold price of $1,950 per ounce. They cite geopolitical conflicts, particularly in the Middle East, as significant factors that could drive gold prices even higher if tensions escalate (CAPEX Trading).
- TD Securities forecasts that gold prices could average around $2,300 in the second quarter of 2024, reflecting a strong bullish sentiment based on continued economic uncertainty and central bank policies (CAPEX Trading).
- LiteFinance analysts pointed out that gold’s recent rise to over $2,450 per ounce has been fueled by a combination of geopolitical tensions, such as the conflicts between Russia and Ukraine, and economic policies like the U.S. Federal Reserve’s interest rate decisions (LiteFinance).
Key Points:
i. Gold prices hit a record high of $2,531.60 per ounce, driven by expectations of US interest rate cuts.
ii. Lower interest rates make bonds and stocks less attractive, leading investors to seek gold as a safer investment.
iii. Ongoing geopolitical conflicts, such as those in Ukraine and Gaza, have contributed to the rise in gold prices.
iv. UBS forecasts that gold prices could reach $2,600 per ounce by the end of 2024.
v. Other central banks, including the European Central Bank and the Bank of England, have also begun cutting interest rates, affecting mortgage rates in the UK.
Charles William III – Reprinted with permission of Whatfinger News
