Gold is once again on the move after hitting a pause on renewed dollar strength. The yellow metal is poised to finish the week on a high, adding to the 28% gain recorded for the year to date. The precious metal’s upward momentum is fuelled by strong demand for a safe haven amid escalating geopolitical tension in the Middle East.
Gold Rally
Spot gold has already powered through the $2660 an-ounce level, with all indications showing it could be headed to the $2700. Price had jumped by more than 1% early in the week after Iran launched missile strikes on Israel in retaliation to the killing of a key Hezbollah figure.
Investors are increasingly being drawn to gold in the current volatile economic climate. This year, the valuable metal has consistently surpassed previous price milestones as individuals seek methods to safeguard their assets. Amid rising inflation worries and international instability, gold’s position as a secure investment option is especially robust at the moment.
Robust central bank purchases are also helping fuel the upward momentum of the metal. Even though total demand has decreased from its peak in early 2024, gold reserves are still increasing, with most activity coming from central banks in emerging markets (EMs).
August’s net purchases fell well short of the 12-month average of 33t and were at their lowest level since central banks announced a net sale of 2t in March. EM central banks makeup 70% of all reported net purchases year-over-year, with Turkey accounting for 25% of all central bank purchases to date.
Nevertheless, the upward momentum in gold prices is being hampered by renewed dollar strength as it continues to attract bids as a safe haven. The dollar strengthening made the price of the bullion more expensive for other currency holders. With tension in the Middle East not showing signs of fizzling anytime soon, gold could be headed to a new all-time high.
When political uncertainty prevails, gold is regarded as a secure investment that stores wealth. Additionally, the yellow metal tends to prosper in an environment with low interest rates. Daniel Hynes, senior ANZ commodities strategist, noted that gold will be driven by real interest rate prospects in the long run.
The likelihood of a 25 basis point reduction from the US Federal Reserve in November is seen by traders as 61%, which should provide further impetus for gold to continue rising.
Gold Outlook
With predictions for gold ranging from $2,600 to $2,800 per ounce, it appears ready for more gains. This positive perspective builds on the remarkable rise in gold prices since the year’s beginning. Henry Yoshida, certified financial planner and co-founder of Rocket Dollar predicts that gold prices will likely continue to climb steadily.
He identifies the anticipated Fed rate cuts and prospective central bank purchases as the main motivators. His optimistic prediction of $2,800 an ounce indicates great faith in the upward trend in gold prices.
More economic data, such as the state of the labour market, will soon be available. The expectation that the Fed will cut rates more aggressively could lead to a spike in the price of gold if jobless figures worsen.
