Why gold is rising in price: factors influencing the asset price
Gold is one of the most reliable and popular forms of investment. Despite fluctuations, its value regularly increases, which makes investing in it a great way to protect your money from inflation. According to forecasts, gold is getting more expensive, and this trend will continue until 2024.
Gold is rising in price and analysts expect the it’s price to hit a record high of US$2,500 per ounce this year. The historical high is just over US$2072, recorded in August 2022.
Market sentiment seems to be the main reason for the asset’s rise. Fears of a global economic recession are having a negative impact on the investment sphere, and many of its participants prefer to invest in reliable instruments. Another factor in gold’s rise is the end of the interest rate hike policy that central banks have pursued for two years in an attempt to curb inflation.
Predictions for gold price rise
Analysts from some firms, including Livermore Partners and Wheaton Precious Metals, are talking about a record rise in gold prices. They agreed that the precious metal could top US$2,500 an ounce. Bart Melek, the head of TD Securities, predicts that an ounce of gold will be worth US$2,100 by the beginning of 2024. For him, the key factor is the actions of the Federal Reserve, which is not yet going to revise the level of interest rates.
According to TD Securities, in 2023, the cost of gold will show better dynamics compared to other assets. This demonstrates the metal’s stability in the face of interest rate fluctuations and once again proves its reliability in times of market volatility.
WisdomTree’s forecast includes three options for how events will unfold:
1. By the second quarter of 2024, the price of an ounce will be around US$2,225. At the same time, inflation will continue to fall, the dollar will weaken slightly, and bond yields will fall.
2. The FSR will resort to lowering interest rates. The desire to slow the economy’s recession will cause such a move. At the same time, there is a risk that the weakening of the dollar will become quite intense. This is possible if the Fed cuts rates faster than the ECB and other major regulators. In this case, inflation will remain high, and the price of gold will be US$2490 per ounce.
3. Consumer inflation would fall to 1.8% – below the Fed’s target. The Fed’s tight policy could lead to this outcome, contributing to a rise in bond yields and a strengthening of the dollar. In this case, the likelihood of a recession increases, which means that many investors will turn to gold to protect their finances. This will lead to a fall in the metal’s price to US$1,710 an ounce.
The analysts note that the third scenario is unlikely, as there are no signs that inflation can come down quickly.