Against the background of geopolitical conflicts and rate cut expectations, the gold price has repeatedly broken historical highs since the beginning of this year, reaching $2760/ounce, $2770/ounce, $2780/ounce... forcing major Wall Street banks to continuously raise their target prices amidst constant 'face-slapping'.

Currently, the focus of the market undoubtedly lies in where the end point of this round of gold price hikes will be. According to Wall Street news, Citigroup, Goldman Sachs, UBS, Bank of America, and many other major Wall Street banks have basically reached a consensus on the future trend of gold prices - rising to $3000/ounce next year, nearly a 9% increase from the current gold price. Morgan Stanley is even more aggressive, expecting gold prices to reach $3100/ounce in the first quarter of next year.

Safe-haven demand is one of the main factors driving the rise in gold prices. Earlier reports from Goldman Sachs pointed out that since the outbreak of the Russia-Ukraine conflict, global central banks' demand for gold has quadrupled. Bank of America noted that under the uncertainty of the U.S. election and a global central bank rate-cutting cycle, gold is the best hedge asset.

From a primary perspective, Morgan Stanley believes that the influence of gold ETFs, central banks, and individual investors' positions in the futures market on gold prices continues to increase. Citigroup's latest report also points out that currently, overall gold investment demand, including public and private investments, remains at historically high levels, exerting upward pressure on gold prices; in addition, with global jewelry demand showing resilience, along with increased financial demand, it has effectively supported gold prices over the past 3-4 months.

As of the time of writing, spot gold is trading at $2752.6 per ounce.

Citigroup: High investment demand is driving the rise in gold prices.

On October 31st, Citibank analyst Maximilian J Layton and his team released a report stating that the upward trend in spot gold prices this year cannot be explained by traditional gold pricing frameworks, Citibank has adopted a new investment-driven fundamental flow framework to explain gold pricing.

Using the new fundamental framework, Citibank found that even though the investment demand as a proportion of mineral supply decreased month-on-month, part of the reason for the continued rise in gold prices is that the overall investment level remains relatively high.

When the investment ratio exceeds 70% of mineral supply, gold prices tend to rise in order to reduce jewelry demand and encourage mineral and scrap supply.

In the third quarter of 2024, the investment ratio was 78%, lower than the second quarter's 92%. Citibank predicts that the investment demand as a proportion of mineral supply will rise to 90%, which could support a 3-5% quarterly increase in spot gold prices over the next few quarters.

In addition to investment demand, jewelry demand is also supporting the rise in gold prices.

Citibank stated that in the high investment demand and high price environment, jewelry demand has shown considerable resilience - seasonal rebound in the third quarter, rebounded from the extremely low levels in the second quarter. Moreover, jewelry demand in the third quarter is two to four times higher than in 2011 and 2012 when gold prices were at similar real levels.

Citibank also believes that the last short-term factor supporting the rise in gold prices over the past 3-4 months is investment positions. Non-commercial holdings of gold on the Comex exchange increased by 183 tons to 918 tons in the past 4 months, accounting for 4% of annual demand.

Goldman Sachs: Central Banks' demand expectations have quadrupled.

Goldman Sachs stated that central banks in emerging markets have increased their purchases of gold. From a structural perspective, central banks' demand is higher than that of investors and speculators (bringing a 9% increase by December 2025). In addition, the gradual increase in gold ETF holdings after the Fed rate cut (resulting in a 7% increase) offset the drag caused by Goldman Sachs' assumption of a gradual normalization of positions (resulting in a 6% decrease).

Since the Russia-Ukraine conflict, Goldman Sachs' expectations for global central bank demand for gold have quadrupled.

According to Goldman Sachs' new model estimates, for every additional 100 tons of gold demand, the gold price will rise by 1.5%-2%.

Morgan Stanley: The influence of ETF holdings, central bank purchases, and investors' positions in the futures market on gold prices is increasing.

On October 23, due to the breakdown of the old relationship between gold prices, the US dollar, and oil prices, Morgan Stanley has developed a new regression model to measure changes in gold prices. The new model includes various parameters such as ETF flows, central bank reserves, Consumer Price Index (CPI), US Dollar Index (DXY), global risk index, and net futures positions.

Morgan Stanley stated that in the past five years, the influence of ETF holdings, central bank purchases, and investors' positions in the futures market on gold prices has increased. Factors that cannot be captured by other high-frequency data, such as demand for gold bars and coins, OTC trading, mining supply, and recycling, also affect gold prices.

Despite rising interest rates recently, the gold price continues to rise. This is related to the increase in central bank purchases and strong demand for gold bars and coins, while rising mining costs also provide support for the price.

UBS Group: Gold is the best hedge asset.

Multiple major central banks globally entering rate-cutting cycles, market expectations of further rate cuts heating up, driving the rise in gold prices - gold does not generate any interest, so prices usually benefit from rate cuts. UBS Group believes that gold is the best hedge asset.

UBS Group Chief Strategist Michael Hartnett pointed out in a previous report:

The bull market in gold is being driven by policy and inflation. The 2020s are a decade of fiscal surplus in the United States and globally, as well as a decade of technology, trade tariffs, and protectionism.

The Federal Reserve is determined to reduce real interest rates over the next few quarters. As investors only need to hedge against the threats of inflation and US dollar depreciation, the price of gold could easily surpass $3000 per ounce.

In addition, the uncertainty of the US presidential election also makes gold more attractive.