| 21 May 2024, Tuesday |

Gold prices seen rising towards record highs as rate rises near end

As the United States reduces the pace of rate hikes and eventually stops increasing them, economists predict that gold prices will soar towards record highs above $2,000 an ounce this year, albeit with some turbulence.

As inflationary pressures have subsided and markets anticipate a less aggressive monetary policy from the U.S. Federal Reserve, spot prices for the precious metal have soared beyond $1,900 an ounce, rising by almost 18% since early November.

Fast-rising interest rates hammered gold prices last year, kicking them as low as $1,613.60 in September from a high of $2,069.89 in March – just shy of a record peak in 2020.

Higher rates lifted returns on bonds, making non-yielding gold less desirable for financial investors, and pushed the dollar to its strongest in 20 years, making dollar-priced gold costlier for many buyers.

The weakening U.S. currency and bond yields “will become macro tailwinds for the yellow metal, pushing gold above $2,000/oz in the coming months,” said analysts at Bank of America.

With less pressure from the dollar and bonds, investors are likely to buy bullion as a hedge against inflation and economic turbulence, said WisdomTree analyst Nitesh Shah, adding that prices could easily move above $2,100 an ounce by year-end.

Gold is traditionally seen as a safe place to store wealth. “The risk of central banks overdoing it and pushing their economies into recession is high,” said Shah.

  • Reuters