The price of gold stay a breath away come on $2,700 an ouncea new historical record for the metal, which continues to update all-time highs, in one phase of great uncertainty economic and political on a global level. For two consecutive sessions gold reached a maximum of 2,690 dollars and above, confirming the strongly bullish trend of the last period, which led the precious metal to earn more than 5% in the last month And more than 23% since the beginning of the year.
Geopolitical tensions
The missile attackIran in Israel the state of war declared by Tehran has certainly given a bullish input to gold, which due to its nature of safe haven asset gains value in times of geopolitical uncertainty. An aggravation of the Middle Eastern crisis that pairs with the persistent ones tensions in Eastern Europewhere Ukraine continues to find US and NATO support against Russia.
But there is also the question of rates
The following factors also contributed to supporting the price of gold central bank policies, in particular the Fedwhich followed the ECB in the phase of reducing the cost of money, announcing a first maxi rate cut 50 points based in September. And this is because the data oninflation American were lower than expectations for two consecutive months, highlighting underlying inflation at 2.4% and confirming that inflationary pressures are running out.
Naturally, the ECB also further reduced interest ratesto a more contained extent of 25 basis points, in the face of inflation that even slipped below the target of 1.8% in September.
The Fed’s 2024 dot plots signal at least two more 25 basis point cuts by Decemberbut the market is also pricing in a cumulative cut of 75 points by the end of the year. A factor that would be highly bullish for gold, which always benefits from accommodating monetary policies.
The weakness of the dollar
The second factor that is supporting gold is the dollar weakness US: starting mid-July the US Dollar Index fell about 4%. The US currency has underperformed the broader movement in market interest rates, implying a further depreciation in the coming months. This will be a positive factor for gold, which moves against the trend of the greenback.
Central bank purchases slow down
The negative effect of the increase in the price of gold is represented by slowdown in purchases by central banksa factor that has so far contributed to supporting the price of the metal.
Since the beginning of June, central banks’ gold purchases have declined: they averaged around 80 tons per month in the first semester, but since then they have reduced to around 40 tonnes. An effect induced by the sharp increase in the price of gold, which dissuaded central banks from further increasing their reserves. However, if gold goes back downcentral banks will not miss the opportunity to increase their gold reserves.
UBP sees gold at $2,800
The gold rush is not over yet. For Peter Kinsella, Global Head of Forex Strategy at Union Bancaire Privée (UBP), 2025 could see gold reach levels of $2,800 per ounceafter reaching a level of around 2,685 dollars per ounce at the end of the summer.
“As far as the retail demand, we note that in recent weeks investors have increased theirs allocations to ETFs focused on gold – underlines the analyst – putting an end to two consecutive years of outflows. We expect ETFs to continue to register in the coming months significant inflows, as investors diversify into uncorrelated assets such as gold.”
“As far as consumers are concernedAsia continues to see strong demand. Chinese consumers have increased their allocations to gold, likely due to the scarcity of domestic savings alternatives and as a haven for yuan-denominated savings. Demand for Indian imports has increased following the reduction in import duties announced in this year’s budget.”
