Due to the rising U.S. dollar and Treasury yields, spot gold fell below the $2,300 mark today, hitting a two-week low and closing down 0.92% at $2,298.01 per ounce. In recent weeks, gold prices have been consolidating in a high range after reaching historical highs, and the technical outlook for the future remains unclear. However, major Wall Street institutions are still bullish on gold, believing it could rise to $3,000.
Previously, Bank of America released a report suggesting that gold prices could reach $3,000 in the next 12 to 18 months, citing reasons such as the Federal Reserve initiating rate cuts and increasing debt driving economic uncertainty. Additionally, Citi analysts stated that strong physical demand, central bank purchases, and macroeconomic factors continue to support the bullish outlook for gold, potentially causing prices to soar to $3,000 within the next 12 months.
Michael Widmer, a commodities analyst at Bank of America, indicated that if the certainty of Fed rate cuts increases, a pickup in non-commercial demand, or investment demand, will trigger the next bull market for gold. Regarding investment demand for gold, ETF inflows and the clearing volumes of the London Bullion Market Association (LBMA) are important indicators to observe. According to data from the World Gold Council (WGC), physical gold ETFs experienced their first net inflow in 12 months in May.
The Bank of America report pointed out that central bank gold purchases remain a key factor supporting gold prices. The latest central bank gold survey by the WGC showed that strong demand for gold from global central banks has not waned, with 29% of central banks planning to increase their gold reserves in the next 12 months. Another reason for the bank’s bullish stance on gold is the rise in U.S. Treasury yields. Although theoretically, rising bond yields are negative for gold, the underlying crisis will trigger investor risk aversion, ultimately driving demand for safe-haven assets and resulting in a return of funds to the gold market.
Citi believes that gold will find support above $2,000-$2,200 per ounce and test all-time highs (ATHs) by the end of 2024, subsequently soaring to $3,000 in 2025.
The bullish reasons include, firstly, the resilience of the gold market. Despite a stronger dollar, high-interest rates, and strong U.S. equities, gold prices have rebounded to $2,400 per ounce. Secondly, the outlook for peak interest rates also supports this optimistic prediction. Finally, global central bank demand for gold remains strong. Emerging market central banks, in particular, have been significant buyers of gold, and this trend is expected to continue.
