 "Gold prices expected to rise towards record highs above $2,000 an ounce")
Gold prices are expected to rise towards record highs above $2,000 an ounce this year, albeit with a little turbulence, as the United States slows the pace of rate hikes and eventually stops increasing them, according to industry analysts.
Spot prices of the precious metal have shot above $1,900 an ounce, surging by about 18% since early November as inflationary pressures recede and markets anticipate less aggressive monetary policy from the U.S. Federal Reserve.
Fast-rising interest rates hammered gold prices last year, kicking them as low as $1,613.60 in September from a high of $2,069.89 in March - just shy of a record peak in 2020.
Higher rates lifted returns on bonds, making non-yielding gold less desirable for financial investors, and pushed the dollar to its strongest in 20 years, making dollar-priced gold costlier for many buyers.
Graphic: Gold, U.S. dollar and real U.S. yields, https://fingfx.thomsonreuters.com/gfx/ce/dwpkdakbnvm/GOLD%20GRAPHIC%202023%20DOLLAR%20AND%20YIELDS.JPG The weakening U.S. currency and bond yields "will become macro tailwinds for the yellow metal, pushing gold above $2,000/oz in the coming months," said analysts at Bank of America.
With less pressure from the dollar and bonds, investors are likely to buy bullion as a hedge against inflation and economic turbulence, said WisdomTree analyst Nitesh Shah, adding that prices could easily move above $2,100 an ounce by year-end.
Gold is traditionally seen as a safe place to store wealth. "The risk of central banks overdoing it and pushing their economies into recession is high," said Shah.
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Speculators who in November were betting gold prices would fall have amassed a net long position in COMEX futures of 8.3 million ounces of gold, worth $16 billion, helping push up prices.
Graphic: Gold speculative positioning, https://fingfx.thomsonreuters.com/gfx/ce/xmvjklbddpr/GOLD%20GRAPHIC%202023%20POSITIONING.JPG Analysts expect central banks to continue stockpiling gold after buying more metal in the first nine months of 2022 than in any year in half a century, according to the World Gold Council.
Retail demand for gold bars and coins should also remain strong, boosted by a revival of economic growth in China, the biggest consumer market, said analysts at ANZ.
Graphic: Gold demand, https://fingfx.thomsonreuters.com/gfx/ce/myvmogblevr/GOLD%20GRAPHIC%202023%20DEMAND.JPG But gold may have gone too far too fast in the short term and needs to correct lower, analysts said.
"Should prices fall from current levels to the $1,870-1,900 an ounce range, we expect the (upward) trend to reverse," the bank said, adding that if gold falls below $1,800, it could slip to $1,730. Graphic: Gold technicals, https://fingfx.thomsonreuters.com/gfx/ce/dwvkdakwnpm/GOLD%20GRAPHIC%202023%20TECHNICALS.JPG
(Reporting by Peter Hobson; Editing by Pratima Desai and Emelia Sithole-Matarise)
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)