Gold prices are expected to rise to a record high above $2,000 an ounce this year, albeit with little volatility as the United States slows down the pace of rate hikes and eventually stops raising rates, industry analysts said.
Spot prices for the precious metal have topped $1,900 an ounce, up about 18% since early November, as inflationary pressures subside and markets anticipate less aggressive monetary policy from the US Federal Reserve.
Fast-rising interest rates hit gold prices last year, pushing them up to $1,613.60 in September from a high of $2,069.89 in March, just short of a record high in 2020.
Higher rates have boosted bond yields, making unprofitable gold less attractive to financial investors, and pushed the dollar to its strongest level in 20 years, making dollar-denominated gold more expensive for many buyers.
Weaker US currency and bond yields “will be a macro tailwind for the yellow metal, pushing gold above $2,000 an ounce in the coming months,” analysts at Bank of America said.
With less pressure from the dollar and bonds, investors are likely to buy bullion as a hedge against inflation and economic turmoil, WisdomTree analyst Nitesh Shah said, adding that prices could easily rise above $2,100 an ounce by the end of the year.
Gold has traditionally been considered a safe place to store wealth. “The risk that central banks will overdo it and push their economy into recession is high,” Shah said.
Speculators who had bet on falling gold prices in November accumulated a $16 billion net long position in COMEX futures for 8.3 million ounces of gold, which helped push prices higher.
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