Strong physical demand, central bank purchases, as well as macro factors such as concerns about US bonds and the Fed's interest rate cuts, will support the rise in gold prices.
Since the beginning of this year, gold prices have been running strongly and have risen nearly 13% so far this year, currently at $2326.94 per ounce.
According to recent reports from Bank of America and Citigroup,$XAU/USD (XAUUSD.CFD)$It may rise to $3000 per ounce, with 30% upside potential compared to the current price. As for the factors supporting the rise in gold prices, they include strong physical demand, central bank purchases, and macro factors such as concerns over US bonds and rate cuts by the Fed.
Bank of America: Concerns over US bonds will support a gold bull market.
Bank of America believes that the gold price may reach $3000 per ounce in the next 12-18 months.
Bank of America points out that
This will require non-commercial demand to rise, and rate cuts by the Fed may trigger this situation, leading to inflows into physically-backed gold ETFs.
Central bank purchases are another key factor, and actions to reduce the proportion of the US dollar in foreign exchange portfolios may encourage central banks to buy more gold.
Bank of America presents another point of view that concerns over US bonds may support a gold bull market:
The violent fluctuations in the US Treasury market are a "tail risk," and over time, the likelihood of this happening will become greater.
More importantly, the US Treasury market does not need a real disaster to stimulate the demand for spirit writing. Only the increasing concerns about possible disasters are necessary.
The liquidity of the US debt market itself has declined significantly, and if the Treasuries market becomes more fragile, coupled with the current political stalemate and soaring debt that may be unsustainable, this gives reason to worry about unexpected events.
Citigroup: Strong demand and macro factors support the bullish trend of gold.
Citigroup analysts believe that due to strong physical demand, central bank purchases, and macroeconomic factors that continue to support the bullish outlook for gold, the price of gold may soar to $3,000 in the next 12 months.
Citigroup believes that:
Gold will receive support above $2,000-$2,200 per ounce and will test historical highs (ATHs) by the end of 2024, and then soar to $3,000 in 2025.
Citigroup states that there are several key factors supporting this bullish outlook:
Firstly, the asymmetric risk skew in the market has shown resilience. Despite the strength of the US dollar, high interest rates, and a strong US stock market, the gold price bounced back to $2,400 per ounce. If there is a negative turning point in the US economic growth, it should form a positive case for gold under the same conditions, thereby enhancing demand for safe-haven assets such as gold.
In the next 6-12 months, the US economic risks are biased towards weak growth and declining yields. The uncertainties of the US election may widen the fiscal deficit and raise term premiums, thereby increasing the demand for safe-haven assets such as gold.
Secondly, the prospect of interest rate peak also supports this optimistic forecast. The Fed's loose cycle, coupled with the rebound of the US bond market, will be an important bullish factor for gold. It is expected that in the second half of 2024, the US economy will experience a recession, which may drive down yields and boost gold prices.
In addition, global central bank demand for gold remains strong. In particular, central banks in emerging markets have always been important buyers of gold, and this trend is expected to continue.
Editor/Somer