Gold surged to a new record high of $2,626 per ounce on Friday, driven by renewed expectations of further interest rate cuts in the United States. The precious metal’s safe-haven appeal has been significantly bolstered by these rate cuts, positioning gold for further price increases, analysts say.
Market experts predict that gold could soon test higher levels, with the next target range between $2,649 and $2,661. Support is anticipated around $2,547, with stronger backing at $2,477, where the 50-day moving average offers a cushion. Analysts note that as interest rates fall, the opportunity cost of holding non-yielding assets like gold diminishes, making the metal more attractive to investors seeking stability during economic uncertainty.
“With the weakening dollar, demand for gold is rising,” said Rania Gule, senior market analyst at XS.com. “Despite offering no yield, gold remains an attractive option for investors looking to safeguard their wealth in an environment where returns from other assets are declining.” Gule attributed the price hike to a combination of economic and geopolitical factors, with the dollar’s decline playing a key role in boosting gold’s demand.
Goldman Sachs Research has forecast that the price of gold will reach $2,700 by early 2025, spurred by continued rate cuts and strong central bank purchases, particularly in emerging markets. Goldman Sachs also cited potential US financial sanctions and concerns about the growing national debt as factors that could further push prices higher.
“Gold is our strategists’ preferred near-term long, and it’s the top hedge against geopolitical and financial risks,” said Goldman Sachs Research strategists Samantha Dart and Lina Thomas in a note. The strategists highlighted three primary drivers for gold’s upward trajectory: central bank purchases, expected Federal Reserve rate cuts, and potential geopolitical shocks.
Since Russia’s invasion of Ukraine in 2022, central banks have ramped up gold purchases, roughly tripling the amount bought previously. Goldman Sachs expects this trend to continue amid concerns over potential US financial sanctions and the mounting US sovereign debt burden.
Analysts agree that gold’s value as a hedge against geopolitical and fiscal instability remains strong, particularly as the US dollar continues to weaken. Non-dollar investors, in particular, are finding gold increasingly attractive, supporting the metal’s ongoing rally. Gold has gained over 26% so far in 2024, benefiting from tensions in the Middle East and Europe.
However, experts caution that any shifts in monetary policy or de-escalation in global tensions could lead to a correction in gold prices. Investors are advised to remain vigilant while taking advantage of the current upward trend.