By Joe Hoppe
Gold is likely to hit a new all-time high in the second half of the year, on supportive central bank demand, geopolitical concerns and investor fears of missing out, according to a new report.
The yellow metal's average annual price is forecast to rise by 16% to a record $2,250 a troy ounce in 2024, said precious-metals consultancy Metals Focus. Bullion's price is up by more than a third since October, and it recorded its strongest rally in terms of speed and extent since 2011 over the months of March and April, the report said.
Gold futures hit an all-time record on May 20 of $2,454.2 an ounce, before slipping back in the following sessions. However, they are still up 15% in the year-to-date, and most recently rose 0.2% to $2,379.9 an ounce.
This rally has been driven by positive macroeconomic factors, with U.S. debt--and the expensive servicing it requires--attracting attention, as have uncertainties over China's outlook.
A particularly key driver of the precious metal's sustained rally has been the fear of missing out from investors that didn't catch it early enough. Western funds avoided gold early in the year, expecting fading hopes for U.S. interest-rate cuts to push down the price.
When this was proven wrong, institutional investors aggressively corrected, and now those holding long positions are reluctant to liquidate them despite higher prices, the report said.
"From an investment point of view, the heavy-weight, high-net-worth investors have been generally coming in," said Philip Newman, managing director of Metals Focus.
Non-interest bearing bullion is historically tied to interest rates, with higher rates generally diminishing gold's appeal. But even if U.S. interest rates stay high for longer than expected, the consensus now is that rate cuts are still coming, while geopolitical tensions in the Middle East have further fuelled gold's rise as a safe haven, Metals Focus said.
Recycling has also been far more constrained than in previous rallies, tightening supply, and although below its all-time peaks, central banks continue to stock up on gold, with Metals Focus forecasting another 1,000 tons of purchases this year.
Near-term corrections are still likely, as traders take profit, but any price falls should be short and limited in scope as investors are still sitting on the sidelines, waiting for opportunities to get in on gold, the report said.
"Later this year, we expect prices will rise again, with a new all-time high likely," said Neil Meader, director of gold and silver at Metals Focus. "After all, the recent $2,450 peak is lower, in real terms, than the 1980 one, which would have been around $3,000 in today's prices."
Write to Joe Hoppe at joseph.hoppe@wsj.com
(END) Dow Jones Newswires
06-06-24 0814ET
