Gold prices surged to unprecedented levels in mid-May, fueled by robust demand from safe haven investors and hedge funds. This rally is largely attributed to expectations of interest rate cuts from the Federal Reserve and other central banks, alongside growing economic uncertainties and rising fiscal deficits, which have led to significant purchases, especially in the over-the-counter (OTC) market.
Despite this rise, HSBC’s precious metals analysts note that gold’s performance has been somewhat at odds with positive real interest rates. They suggest that while this disconnect has been notable, real rates are expected to exert downward pressure on gold prices in late 2024 and 2025.
Even as exchange-traded funds (ETFs) continue to liquidate their holdings, strong OTC purchases and interest from real money investors have helped stabilize the market. Current net long positions on the Chicago Mercantile Exchange (CME) remain robust, though analysts predict limited growth from these levels.
“Market sentiment remains bullish, and while the immediate upward trend shows no signs of weakening, prices may be increasingly overstretched,” they commented.
In response to recent strength, HSBC has adjusted its average price forecasts for gold. The bank has raised its average gold price estimate for 2024 from $2,160 per ounce to $2,305 per ounce, while lowering the 2025 forecast from $2,105 to $1,980, indicating a potential decline of 12% from current prices.
Looking ahead, analysts foresee a rebound in gold prices by 2026, increasing their average projection for that year from $1,880 to $2,025 per ounce. HSBC’s long-term forecast for gold is now set at $2,000 per ounce, up from a previous estimate of $1,700.
For year-end predictions, HSBC forecasts gold prices of $2,210 per ounce for 2024 and $2,075 for 2025.
