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While the price of gold has encountered some resistance near $2,400 per ounce, analysts are overall optimistic about gold’s next move, believing that the precious metal will not see any significant downward adjustments in the short term, and gold’s uptrend is far from over.
Nitesh Shah, head of research at WisdomTree, said in an interview with Kitco News that central banks are still strategically allocating to gold despite the fact that prices are near record highs, and the strong demand will continue for some time. Analysts speculate that times like now, when there is a pullback in gold prices, is the time for central banks to continue buying.
In addition to central banks, Shah expects strong demand from Chinese retail investors to help continue to support the gold prices, as China’s property and stock markets are struggling, and investors don’t seem to have a better option than to buy gold. This lays the foundation for driving continued strength in gold prices through 2024.
Last week, commodities analysts at UBS said in an updated gold market outlook that it expects the price of gold to reach $2,500 an ounce in September and $2,600 an ounce by the end of the year, a prediction that is higher than the original projections of $2,400 and $2,500 an ounce, respectively.
UBS also issued a forecast for the precious metal for the next 12 months, expecting gold prices to rise to $2,700 an ounce by June 2025.
In the report, the analysts noted that there are three factors supporting gold’s uptrend over the next 12 months, with the first support coming from the Federal Reserve. Although the Fed has been reluctant to signal a rate cut anytime soon as inflation remains high, it is only a matter of time before interest rates begin to fall. In addition to this, the second factor supporting the rise in gold prices is the continued demand from central banks, and the third is geopolitical conflict.
With the U.S. election approaching, wars in the Middle East and Ukraine continuing, and trade tensions rising between the U.S. and China, continued geopolitical uncertainty will provide support for safe-havens such as gold.
Apart from gold, Shah is also bullish on silver. The recent resurgence of investor interest in silver has pushed the price to an 11-year high of over $32 an ounce. A 4% rally earlier this week helped bring the gold-silver ratio down to near 73, its lowest level in nearly three years.
He added that demand for silver will remain resilient even as the global economy slows, as silver is a key metal for many different industries and the growing electrification of the global economy will require more silver, including the artificial intelligence revolution. As energy consumption shifts from burning oil, coal and natural gas to wind and solar, we will need more silver. However, gold remains the preferred safe-haven asset when the market sentiment is extremely bearish.
