J.P. Morgan said that as tension in the Middle East intensifies, there may be room for further growth in gold.

The bank predicts that the average price of gold will reach 2,500 US dollars per ounce in the fourth quarter. Analyst Gregory C. Shearer (Gregory C. Shearer) said in a report last Sunday that tension in the Middle East and the ban on Russian gold will continue to support the rise in gold prices.

The price of gold soared by more than 14% in 2024, hitting a record high of $2431.38 per ounce in the intraday session on Friday, as investors prepared for further escalation of the situation in the Middle East. Over the weekend, Iran fulfilled its threat to attack Israel by firing more than 300 drones and missiles at targets in the country. Iran called it a response to Israel's attack on Damascus, Syria.

Meanwhile, investors are wary of continued high inflation. The stagnation of anti-inflation progress delayed market expectations that the Federal Reserve would cut interest rates.

The price of gold has repeatedly hit record highs since the beginning of the year, but J.P. Morgan believes that gold still has more room to rise. Hiller said, “Given positions and recent price movements, the risk of a pullback for gold is still very high in the short term, but geopolitics is still a bullish uncertain factor as the retaliation cycle between Israel and Iran may continue to escalate. Overall, we think any pullback will still be viewed as a buying opportunity, and we expect the price of gold to continue to rise in the coming quarters.”

Hiller also added that as the price of gold soars, gold holders are unlikely to sell their gold holdings in the future.

The analyst explained, “The most surprising observation for us was that, given the magnitude of the price spike, there wasn't a large number of sales that we would normally expect to sell at a high level. Essentially speaking, the rise in gold prices was not so much driven by the impact of new physical demand, but rather because liquidity was worse in early April; the latter is probably more related to the lack of large-scale sellers in the gold market, which is still competitive in general.”

The fierce rise in gold has kept Wall Street banks scrambling to raise target prices. Goldman Sachs raised its gold year-end price target last week, saying that gold is currently in an “unshakable bull market.”

The bank's analysts pointed out in an April 12 report: “In fact, despite the market's expectation that the number of interest rate cuts from the Federal Reserve will decrease, the economic growth trend will be stronger, and US stocks are at record highs, the price of gold has risen 20% in the past two months. “The traditional fair value of gold links common catalysts, including real interest rates, growth expectations, and the US dollar, to capital flows and prices, but none of these traditional factors can fully explain the speed and scale of gold price fluctuations so far this year.”

Goldman Sachs said that since mid-2022, most of the impetus for the rise in gold prices has come from new incremental factors (physical demand), in particular the increase in central bank holdings in emerging markets and a significant acceleration in retail purchases in Asia.

Analysts said, “This new factor is still fully acknowledged by current macroeconomic policies and geopolitics. Furthermore, since the Fed's interest rate cut may still be a catalyst to mitigate the outflow of gold ETF funds later this year, as well as right-tail risks brought about by the US election cycle and fiscal environment, the bullish trend of gold is still evident.”

The bank has raised its price forecast for gold at the end of the year to $2,700 per ounce from the previous year of $2,300 per ounce.

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