Gold prices will remain around $2,200 for most of 2024, according to commodity analysts at Société Générale. That’s why analysts say gold’s rise above $2,000 is the beginning of a larger rally.
Are gold prices heading towards peaks?
In its latest commodity outlook, the French bank notes that despite higher bond yields, the bond market poses less risk to gold going forward. Analysts highlight some critical factors that affect gold prices and could propel the market to all-time highs in the new year.
cryptokoin.comAs you’ve been following from , gold prices are struggling to make consistent gains above $2,000. However, the market has remained relatively resilient in the face of higher bond yields. Analysts at SocGen note that even though bond yields are higher, there is significant volatility in the market. They say that this limits the impact of interest rates on gold. In this context, analysts make the following comment:
When Treasuries experience the same level of volatility as they do today, the value of future cash flows tied to the coupon strip on a non-interest-bearing asset like gold decreases.
It is possible that this could create a tailwind for gold prices!
It is possible that the decrease in volatility in the bond market will create some selling pressure for gold. SocGen points out another factor that is likely to limit the precious metal’s downward move. This is a peak in US monetary policy.
There are growing market expectations that the Federal Reserve is done raising interest rates as inflationary pressures begin to weaken and the economy cools. Markets expect the Fed to keep interest rates unchanged in December, according to the CME FedWatch Tool. Moreover, it is pricing in interest rate cuts in May 2024. Based on this, analysts make the following assessment for gold prices:
While the Fed’s interest rate hikes have probably reached their peak, it should be noted that the peak in US interest rates is higher and probably earlier than in other OECD economies. In other words, US interest rates could fall further and earlier than rates in other OECD economies. This could point to a possible dollar weakness in the future, creating a tailwind for gold.
Gold A supporting factor for: Central bank purchases
At the same time, the growing threat of recession could force the Fed to cut rates before inflation gets under control. This is likely to provide further fuel to the gold price rally. Another critical factor supporting gold is the insatiable demand of central banks. Analysts state that central bank demand represented 7.9% of global supply as of the end of the third quarter. Additionally, analysts add that they do not expect the buying trend to end anytime soon. In addition, analysts point out the following:
Overall, we expect continued central bank gold purchases to diversify reserve bases to remain a long-term supportive factor for gold. But most of the impact will be felt beyond our forecast horizon.
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