With the release of the latest inflation data earlier today, gold investors are keenly focused on where prices are headed. Many analysts are optimistic about the yellow metal’s rally this year, with one key level predicted to hold firm.
Gold Prices Rally in 2024
Gold reached nearly $2,450 in May but has since pulled back to around $2,300. Despite this dip, bullish sentiment remains strong. Citi analysts, for example, suggest that gold prices could surge to $3,000 within the next 12 months. “The gold price path is unlikely to be linear, but average prices should trend higher in 2H’24 and 2025,” Citi noted in a recent report.
Taylor Krystkowiak, Vice President and Investment Strategist at Themes ETFs, also sees potential in gold miners, highlighting their low valuations. He noted that in 2011, the price-to-book ratio of both the S&P 500 and miners was about 2x. Today, the S&P 500 trades around 4.8x, while miners are at approximately 1.9x. “The disconnect in valuations, coupled with gold breaking out to new highs this year, suggests that the sector does indeed have more room to run,” Krystkowiak wrote.
Krystkowiak further explained that stagnant supply from declining production and rising demand from central banks continue to support high gold prices and benefit miners. “The recent pullback in gold prices could be an opportune time to get into gold miners because their valuations are still quite attractive on a historical basis,” he declared.
Gold Prices Forecast for 2024
However, the forecast for gold prices for the rest of this year isn’t as bullish. Krystkowiak stated that “given robust demand and limited supply, it is likely that the price of gold will hold above $2,200/oz through the end of 2024.” He added that this projection is supported by historical trading patterns, where gold typically consolidates around new price levels after reaching an all-time high.
With current prices holding above $2,200/ounce, gold remains well above the average all-in sustaining cost of $1,345/ounce for miners. As a result, Krystkowiak believes gold miners will continue to benefit from significantly higher margins on their production, even if gold prices weaken slightly.
Echoing this sentiment, Citi anticipates the market will “be supported well above $2,000-2,200/oz and regularly test nominal all-time highs into the end of 2024” before potentially surging to $3,000 in 2025. “A negative turn in US growth exceptionalism should be positive for gold, enhancing bids for duration and haven assets, all else equal,” Citi concluded in its note.
