Gold prices soared to record highs earlier this week before consolidating around the $2,150 per ounce mark. Analysts at ANZ Group cautioned that while a short-term pullback could be on the horizon, they revised their year-end target for gold upward, indicating optimism for the precious metal’s future performance.
The surge in spot prices, reaching nearly $2,200 per ounce, was driven by ongoing expectations that the Federal Reserve would initiate interest rate cuts by June. However, the release of hotter-than-expected consumer price index data for February cast doubt on this narrative, with stronger inflation figures potentially dissuading the Fed from implementing rate cuts in the near future.
ANZ analysts observed that the recent rally in gold surpassed expectations based on macroeconomic and geopolitical factors. They suggested a potential near-term pullback in gold prices to around $2,100 per ounce.
Despite the anticipated short-term correction, ANZ remains bullish on gold’s prospects, raising their year-end price target to $2,300 per ounce from $2,200 per ounce, implying a nearly 6% upside from current levels. They view the price pullback as an opportunity to establish long positions, believing that the recent rally has bolstered the baseline outlook for gold.
Looking ahead, ANZ analysts identified investment demand as a key driver for gold in the latter half of 2024. They noted that while higher interest rates had led to outflows from market-traded gold investment products since 2022, the potential for central bank easing could reverse this trend, creating significant upside potential for gold holdings.
Additionally, ANZ highlighted the importance of physical demand for gold, particularly from China and India. However, they anticipate a slowdown in physical demand growth, citing easing consumer spending in these key markets.
In summary, while a short-term pullback in gold prices may occur, ANZ analysts remain optimistic about gold’s long-term outlook, forecasting further upside driven by investment demand and potential monetary policy shifts.
