Gold prices soared to an all-time high on Thursday, propelled by central banks’ continued purchases of bullion and heightened geopolitical uncertainties. The precious metal reached $2,203 per ounce, with forecasts suggesting a potential rise to $2,300 per ounce in the latter half of 2024, according to Citi’s Aakash Doshi.
The inverse relationship between gold prices and interest rates remains a significant factor in driving demand. As interest rates decrease, gold becomes more attractive compared to fixed-income assets like bonds, which yield weaker returns in a low-interest-rate environment.
Central banks worldwide have been significant buyers of gold over the past few years, with purchases reaching historic levels. The People’s Bank of China emerged as the largest buyer in 2023, followed by Poland’s central bank and the Monetary Authority of Singapore (MAS). These purchases have helped buoy gold prices despite high interest rates and a strong dollar.
The ongoing Russia-Ukraine conflict has also fueled demand for gold as a safe-haven asset. Countries like Poland and Singapore have increased their gold reserves as a hedge against geopolitical risks. Retail purchases of gold jewelry, bars, and coins have also contributed to the surge in gold prices, particularly in China and India, where consumer demand remains robust.
However, the rise in gold prices may impact consumer spending on jewelry in countries like India, where gold is a significant part of cultural and ceremonial traditions. Nonetheless, investment in gold bars and coins in India has seen growth, indicating continued confidence in the metal as a store of value.
Overall, the combination of central bank purchases, geopolitical tensions, and strong retail demand suggests a positive outlook for gold prices in the near term, with potential for further upside in the coming months.
