Gold Prices Poised for Record High Despite Dollar’s Recovery

Gold prices are on the verge of retesting their all-time high, reaching around the $2,079-2,080 zone set in May. Despite the headwind from a recovering dollar, the yellow metal extended its winning streak for an eighth consecutive day on Friday, hitting $2,075 an ounce. This surge followed a shift in tone from Federal Reserve officials, signaling a potential pivot away from aggressive interest rate hikes to the first rate cut in early 2024.

Bank of America’s metals strategists foresee a shining summer for gold in 2024. While steel is predicted to dominate in the first quarter and base metals to rally in the second half, gold is expected to take center stage during the summer. The analysts emphasize that gold remains closely tied to interest rates, and once the Fed decisively ends the hiking cycle, new buyers are anticipated to enter the market. If the Fed cuts rates earlier, Bank of America believes gold could reach $2,400 per ounce by the end of 2024.

TD Securities’ commodity analysts, in their 2024 gold outlook, project an average gold price of around $2,019 per ounce for the year. Despite being bullish on gold, they caution investors to be patient, predicting prices to push to $2,100 by the second quarter of 2024. They attribute gold’s resilience against higher US rates to the war in the Middle East but underscore its status as a rate-dependent trade.

Rania Gule, market analyst at XS.com, acknowledges potential challenges to gold’s rise, citing the dollar’s modest strength and positive risk sentiment. However, Gule remains optimistic about gold’s steady performance, driven by expectations of the Federal Reserve concluding interest rate hikes. Anticipating a dovish approach from the Fed, market predictions suggest considerable rate cuts in the coming year, positioning gold futures for a bullish climb amid economic uncertainties and market volatility. The attention now turns to statements from Federal Reserve officials, especially Chair Jerome Powell, with the potential to extend gold’s bullish trajectory. Lower interest rates, coupled with relaxed US financial conditions, make gold an increasingly attractive investment amidst economic uncertainties.