Gold prices hit a historic high, with analysts remaining optimistic. Citigroup analysts predict that the price of gold has a 25% chance of reaching a record $2,300 per ounce, and reiterated their forecast of $3,000 in the next 12 to 16 months. Gold is seen as a "hedge tool against recession" in developed markets, and the uncertainty of the US election in November also brings positive news. The price of gold continued to rise on Tuesday, but the actual price is far below its peak in the past. Analysts at Berenberg Bank pointed out that a Trump victory would be a "significant positive" for gold, and stocks linked to gold would trend upwards. The rise in gold prices is related to expectations of a rate cut by the Federal Reserve in June.
Zhitong App learned that in a report on Monday, Citigroup analysts described themselves as "bullish on gold in the medium term," suggesting a 25% chance that the gold price could reach a record $2,300 per ounce in the second half of the year. Their base forecast remains at $2,150 and they reiterated their "unknown factor" prediction of reaching $3,000 in the next 12 to 16 months. Citigroup describes gold as a "hedge tool for developed markets" and sees more benefits arising from the uncertainty of the U.S. election in November.
After hitting new highs in the first two trading days, the price of gold continued to rise on Tuesday. Analysts expect the strength of gold to persist at least until the second half of this year. The April gold futures contract closed above $2,100 per ounce for the first time on Monday, reaching $2,134.2 at the time of writing. Spot gold rose by 0.7% to $2,129 per ounce, but market observers point out that the actual price of gold is much lower than past peaks when adjusted for inflation.
Analysts at Berenberg Bank also noted on Monday that a victory for Trump in the U.S. election would provide a "significant boost" for gold, further supporting this safe-haven asset and shielding it from the ongoing volatility of the Russia-Ukraine and Gaza conflicts.
Therefore, they believe that stocks linked to gold will have an upward trend. They stated that although gold prices have recently approached record levels, these stocks have recently "decoupled from the underlying commodities." They said: "This is mainly due to the better-than-expected performance of the U.S. economy and the consistent hawkish stance of the Federal Reserve on monetary policy."
Rising interest rates are usually associated with a decline in gold prices, as high-yield assets become more attractive. The recent rise in gold prices was driven by expectations of a Fed rate cut at the end of 2023 and in recent days. On the other hand, during economic tensions, gold is often seen as a safe haven. When aggressive monetary policies (such as rate cuts and stimulus) suppress yields, this non-yielding asset is also considered a reliable bet. The recent rise in gold over the past two trading days is more firmly linked to the bet on a Fed rate cut in June. CME's Fed tools show that the market is pricing in a 55% chance of a 25 basis point rate cut in June.
A strategist at ING International stated on Tuesday: "We believe that the Fed's policy will continue to be a key factor in the outlook for gold prices in the coming months. We expect gold prices to continue to fluctuate in the next few months as the market also reacts to macroeconomic drivers and geopolitical events."