Ewa Manthey, Commodities Strategist at ING, forecasts that gold prices are set to peak in the fourth quarter of this year, propelled by a combination of Federal Reserve cuts, sustained ETF inflows, and ongoing central bank acquisitions amidst a backdrop of geopolitical uncertainties.
In a recent monthly update from ING, Manthey highlighted that gold experienced a decline alongside a global equities sell-off earlier in the week, triggered by fears of a looming U.S. recession. Despite this setback, Manthey remains optimistic about gold’s prospects, emphasizing its resilience as a safe-haven asset amid geopolitical tensions and expectations of forthcoming interest rate cuts by the Federal Reserve.
Manthey noted that gold remains up by approximately 15% year-to-date, positioning it as one of the standout performers in the commodity market. Factors such as central bank purchases, robust demand from Asian consumers, and anticipation of Federal Reserve rate adjustments have bolstered gold’s performance, with the precious metal hitting an all-time high in July.
Looking ahead, Manthey anticipates that following a consolidation phase, gold will sustain its upward trajectory. The focus of gold investors, she highlighted, is on the extent and timing of the Federal Reserve’s anticipated rate cuts.
The attention to the Federal Reserve’s policy rate, which has remained relatively high for over two decades, is crucial, with expectations pointing towards a series of rate cuts that could bring the Fed funds rate down to approximately 3.5% by the next summer.
Central bank buying remains an influential factor, with emerging markets like Uzbekistan and India boosting their gold reserves in recent months. However, there has been a slowdown in Chinese purchases, with the People’s Bank of China refraining from adding to its reserves for a third consecutive month in July.
Manthey emphasized that despite fluctuations, central bank demand for gold is expected to remain robust, driven by economic conditions and geopolitical uncertainties.
Regarding gold ETFs, Manthey highlighted a positive trend in flows, with global gold ETFs observing inflows for two consecutive months. While there have been regional disparities in inflows and outflows, the overall sentiment remains optimistic, especially as gold ETF holdings have started to rebound after a period of decline.
ING’s forecast suggests that gold prices are likely to reach their peak in the fourth quarter, with geopolitical factors continuing to shape market movements. Factors such as ongoing conflicts in regions like Ukraine and the Middle East, coupled with the impending U.S. presidential election and potential Federal Reserve rate cuts, are expected to sustain gold’s upward momentum.
The projection from ING anticipates gold to average $2,380 in the third quarter, peaking at $2,450 per ounce in the fourth quarter, resulting in an annual average of $2,301 per ounce.
