Gold prices continue to hover below $2,350 per ounce, consolidating within a narrow range, signaling a period of relative stability. However, analysts from BCA Research suggest that this quiet period may precede significant movements ahead.
BCA Research, known for its bullish stance on gold since November 2022, reiterated its positive outlook for the precious metal in a recent commentary. Market Strategist Roukaya Ibrahim emphasized that while there could be near-term downward pressure on prices as bullish momentum subsides, gold has found solid support around $2,300 per ounce.
According to Ibrahim, one structural factor supporting gold prices is the increasing appetite among emerging market central banks for the metal. She highlighted this trend as a stabilizing force that provides a floor beneath gold prices.
Despite a recent pause in China’s central bank purchases in May, Ibrahim noted that the People’s Bank of China (PBoC) remains committed to bolstering its gold reserves over the long term. She attributed the slowdown to sensitivity to high prices but stressed that China’s strategic motivation to diversify its reserves away from US-dominated systems remains intact.
China’s substantial presence in the gold market is evident from its accumulation of 316 tonnes during an 18-month period, raising its gold holdings to 4.9% of total foreign reserves. Ibrahim speculated that if China aimed to match other developed economies’ gold holdings, it would require purchasing an additional 5.7 thousand tonnes, exceeding the total global gold demand projected for 2023.
Looking ahead, Ibrahim anticipates that shifts in Federal Reserve monetary policy will inject new momentum into gold in the second half of the year. Comparing current conditions to past easing cycles, she suggested that gold could benefit from the impending policy adjustments.
Additionally, Ibrahim highlighted expectations of slower economic growth and a heightened likelihood of a US recession within the next 12 months as supportive factors for gold’s long-term prospects. She recommended increasing exposure to precious metals, especially gold, in commodity and global multi-asset portfolios during periods of near-term price dips.
In conclusion, while near-term movements may be subdued, BCA Research remains optimistic about gold’s trajectory, citing robust central bank demand, geopolitical tensions, and shifting monetary policies as key drivers likely to influence prices in the months ahead.
