Amidst record-high gold prices, the bullish sentiment towards the precious metal remains strong. In a report released on Tuesday, led by Michael Widmer, analysts from Bank of America reiterated their expectation for gold prices to rise to $2400 per ounce this year.
In December 2023, Widmer had predicted a gold rally when the Federal Reserve actually began cutting interest rates, a stance that has now shifted.
June gold futures on the New York Mercantile Exchange last traded at $2,315.10 an ounce before Wednesday’s close, up nearly 1.5 per cent on the day. Gold prices have rallied more than 15 per cent from their mid-February low of just over $2,000 an ounce. Importantly, gold is rising even with the dollar and bond yields at high levels.
Analysts highlight that physical demand for precious metals will continue to support gold prices until 2024, driven by investors in China and India, as well as central banks worldwide. Widmer notes that the People’s Bank of China has been a leader among central banks, exerting significant influence over Chinese retail investors.
Earlier this year, domestic gold jewelry sales and non-monetary gold imports in China reached historic highs. Widmer points out that this reflects Chinese investors finding few investment alternatives than gold amidst subdued stock and real estate markets.
Bank of America analysts suggest that Chinese investors turn to gold due to a lack of better investment options, while central banks globally increase their gold investments to diversify their foreign reserves. Additionally, healthy physical demand from India and stable premiums in regions like Turkey, Istanbul, and Zurich in Switzerland indicate a robust outlook for the global gold market.
Widmer adds that despite some gold ETFs showing outflows, investors are likely to return to the gold market if the Federal Reserve actually begins cutting interest rates. With improving sentiment among Chinese investors and accelerated economic growth, the expectation for gold prices to reach $2400 per ounce in 2024 remains unchanged.
