Gold Enters New Bullish Phase, Analysts Predict Further Gains
Gold prices have reached a new record high, with many analysts predicting that the precious metal will continue to scale new heights. According to Paul Wong, market strategist at Sprott Asset Management, gold has entered a new bullish phase driven by factors such as central bank buying, rising U.S. debt, and a potential peak in the U.S. dollar.
Rising U.S. Debt a Key Driver of Gold Prices
The U.S. Congressional Budget Office expects public debt to rise from 98% of GDP in 2023 to 181% of GDP in 2053, the highest level in the country’s history. As debt increases, governments may resort to printing money to address deficits, which can devalue the currency and enhance gold’s appeal as a reliable store of value.
Central Banks and Investors Flock to Gold
Persistent inflationary pressures and difficult macroeconomic conditions plaguing global economies suggest that central banks and investors are more likely to allocate to precious metals. According to World Gold Council data, the net purchases of gold by central banks in the first half of 2024 rose to 483 tonnes, 5% above the previous record set in the first half of 2023.
Analysts Predict Gold Prices to Reach $3,000
A growing chorus of analysts has predicted that the price of gold will continue to rise to $3,000, with some expecting the commodity to cross $2,800 in the next three months. Michael Widmer, commodities strategist at Bank of America, cited elevated government debt levels and brewing geopolitical uncertainty as reasons for his bullish outlook.
Geopolitical Tensions Support Gold Prices
Rising geopolitical tensions, particularly in the Middle East, have diminished hopes of a resolution to the ongoing conflict. This has led investors to flock to safe-haven assets such as gold, motivated by a desire to buffer against risks and instability in global markets.
Citi Analysts Hold on to Bullish View
Citi analysts have held on to their view that gold will hit $3,000 in the next six to nine months. If oil prices spike due to a near-term escalation in the Middle East, they added, gold should see a lift. Despite a drop in Chinese retail demand over the last three months, gold prices have still performed “extremely well,” reflecting the willingness of buyers to pay higher prices.
Commonwealth Bank of Australia Sees Gold Averaging $3,000
Vivek Dhar, an analyst at Commonwealth Bank of Australia, sees gold averaging $3,000 in the fourth quarter of next year as a result of “persistent weakness in the U.S. dollar.” However, Dhar expects gold to average $2,800 this quarter. Citi recently upgraded their view, also predicting that gold will hit $2,800 in three months.
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