Price of gold for 1g: 72.0819 € (0%)    Price of silver for 1g: 0.8645 € (0%)   Price update for 5:00

Gold Prices at Historic Highs, Further Growth Anticipated

The price of gold reached new historic highs in the first week of March 2024. In early December of the previous year, gold achieved a record price of $2,148.99 per ounce. However, this was a temporary surge based on low volume, corrected on the same day to around $2,070 per ounce. The value of gold has been steadily rising since Friday, March 1, maintaining significantly above the “psychological threshold” of $2,100 per ounce without showing signs of slowing down. Last week, the price fluctuated between $2,130 and $2,140 per ounce.

 

Expectations of Interest Rate Reduction

 

According to analysts, the key driver of this rise is the market’s expectation of monetary easing by central banks worldwide, primarily the U.S. Federal Reserve (FED) and the European Central Bank (ECB). According to the CME Fed Watch Tool, the market has already factored in a 70% chance that the FED will lower interest rates in June. These expectations were fueled by the announcement of weaker economic indicators in the U.S.

 

  • Precious metal traders began this week focusing on the prospects of more accessible monetary policies by major global central banks. Financial analyst Jim Wyckoff for Kitco said that would extrapolate into better consumer and commercial demand for metals and theoretically pressure the U.S. dollar index and lower U.S. Treasury yields.

 

Geopolitical Tensions

 

Monetary easing is expected to impact the price of gold, as high interest rates used to combat inflation raise returns on investment options such as bonds and the dollar, partially diverting demand from precious metals and, in turn, increasing the cost of purchasing gold in non-dollar currencies. In addition to macroeconomic conditions, heightened geopolitical tensions worldwide, particularly in Ukraine and Gaza, also contribute to the rise in precious metal prices.

 

  • Heightened geopolitical tensions worldwide have reduced the short-selling appetite, basically all strengthening gold’s current buy-on-dips credentials,” wrote Ole Hansen, Saxo Bank’s head of commodity strategy.

 

 

Combining these two factors, along with technical indicators influencing the behaviour of some traders, should contribute to further gold price growth by an additional ten per cent. At least, that’s the forecast from experts in precious metals.

 

  • “The big reason here is that we’re seeing the market increasingly believing that a Fed rate cut is nearer rather than further away,” said Bart Melek, head of commodity strategies at TD Securities. “Markets have to be a little bit more convinced for gold to move higher, but ultimately, in the second quarter, we do think it can go over $2,300.”

 

Strong Surge in Prices

 

A rise in the price per ounce above $2,300 would be record-breaking in every aspect. However, an even more significant jump in gold prices has been recorded in the past three months. Since the start of conflicts in the Middle East, the value of an ounce of gold has increased by $300 or around 15%.

 

This impressive data is just the pinnacle of a 16-month journey during which gold has risen by more than 30% – from just over $1,600 per ounce at the end of 2022 to current levels above $2,100 per ounce. This growth has been fueled by war conflicts and record purchases by central banks, with the additional impetus for the rise in gold prices now coming from the (expected) macroeconomic policy.

 

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Sources: Financial Times, Reuters, Kitco

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