Gold prices have been experiencing a robust period, benefitting significantly from the ongoing conflicts in the Middle East. This favorable situation extends to investors who have been acquiring gold, gold ETFs, or engaging in physical purchases of the metal since the start of the year. Predictions for gold price increases were widespread among financial institutions, though they often did not specify exact target levels they expected the prices to reach. Now, financial analysts from Citigroup project that the price of gold could ascend to as high as $3000 USD per ounce, highlighting the sustained positive trend in the gold market.
In the past few weeks alone, gold prices have achieved new records, climbing successively higher. This surge is primarily driven by geopolitical uncertainties and speculations about the timing and extent of interest rate cuts by major central banks such as the Federal Reserve and the European Central Bank. Reflecting on the intrinsic value of gold, John Pierpont Morgan, a prominent figure in American banking and co-founder of JPMorgan, once declared to the U.S. Congress in 1912 that "Gold is money, everything else is credit." This historical perspective underscores gold's enduring reputation as a "safe haven" asset, to which investors frequently turn during periods of significant geopolitical and economic uncertainty.
The current market environment is fraught with instability and unpredictability. Not only has the conflict between Russia and Ukraine been ongoing since February 2022, but there was also recent heightened military activity between Israel and the terrorist group Hamas last year.
Additionally, tensions in the Middle East have escalated following a significant attack by Iran on Israel, involving more than 300 drone and missile strikes. Although the majority of these were intercepted by Israel's Iron Dome defense system, the situation remains tense. Earlier, an attack attributed to Israel targeted the Iranian embassy in Damascus, resulting in the deaths of seven officers of Iran's Revolutionary Guard. This incident has reportedly led to a series of retaliatory actions by Israel against Iran, further stoking regional tensions.
Analysts Aakash Doshi and Arkady Gevorkyan from the American bank Citigroup concur that gold prices are likely to continue benefiting from these ongoing geopolitical tensions. Their analysis suggests that there is seemingly no upper limit to the price escalation of this precious metal. In a recent note to clients, which was also shared with "CNBC," the analysts highlighted that the rise in gold prices has been in tandem with record-breaking performance in stock markets, further illustrating the unique position of gold in financial markets.
The drivers of the current surge in gold prices are not limited to geopolitical tensions between major national players like Israel, Iran, Hamas, Ukraine, and Russia. There is also significant uncertainty concerning inflation. Recent data showed that consumer prices in the USA for March 2024 exceeded expectations, which raises concerns among investors about the timing of interest rate cuts by the Federal Reserve. Originally anticipated in June, the first cut is now speculated to be postponed to September, with only two rate adjustments expected this year instead of three.
These concerns have been intensified by recent cautions from senior monetary authorities, suggesting that a delay by the Federal Reserve in adjusting interest rates could lead to higher inflation or even push the United States into a recession, which in turn could further boost gold prices.
In light of these factors, Doshi and Gevorkyan have revised their price forecast for gold upwards in their latest analysis. They estimate that the price of gold could reach $2350 per ounce by the end of this year and continue to climb to about $2875 per ounce in the following year. Despite these projections, they note that these figures will not represent the peak prices in the upcoming months. They anticipate that gold prices might occasionally spike to even higher round figures.
As per their analysis communicated through "CNBC," they expect the gold price to hit $3000 per ounce within the next six to 18 months. Following this peak, they foresee a stabilization at around $2500 per ounce. Nonetheless, they do not anticipate the gold price to drop below the $2000 per ounce threshold anytime soon. Previously, the analysts had identified a floor price of $1000 per ounce, indicating a strong bullish outlook for gold in the near to medium term.
22.04.2024
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