Gold’s rush to a new all-time high of $2347.58 an ounce is causing a split in opinions about what comes next, with optimists predicting $3000/oz within reach, while pessimists foresee a correction. Citi, Rosenberg Research, and Yardeni Research all forecast a continued rise to $3000/oz, claiming the title of the biggest bull in the room.
However, warnings of a potential gold price fall are present, especially due to factors such as a strong U.S. dollar and the rate of future interest rate cuts. Bob Parker, a senior adviser with the International Capital Markets Association, emphasized that fundamental factors suggest that the upside for gold is minimal, leaving it susceptible to a setback after its recent surge.
Various factors are contributing to the rise in gold prices, including private buyers seeking a safe haven from volatile financial markets, and central banks increasing their exposure to assets separate from the U.S. dollar and other currencies. For instance, Costco, a big discount retailer, is offering one-ounce gold bars alongside everyday items like breakfast cereal and smartphones.
Central bank buying is a significant factor in the gold market, with China’s central bank adding 160,000 ounces to its reserves in March alone. This marks the 17th consecutive month of buying, indicating a strong appetite for gold among central banks. If this trend continues, central banks could surpass the record set in 2022 when they collectively acquired 1081.9 tons of gold, followed by 1037.4 tons last year.
Despite concerns of a potential gold price fall after its recent record-breaking run, banks like Citi see room for the rally to continue. In a research note to clients, Citi raised its price targets for gold and silver over the next three months to $2400/oz and $28/oz, respectively. The bank also lifted its six-to-12-month topside levels towards its bull case scenario of $3000/oz for gold and $32/oz for silver, citing various factors like lower interest rates, geopolitical hedging, financial buying, and robust physical demand as drivers of the bullion complex.
Overall, the outlook for gold prices remains uncertain, with conflicting views on whether the current rally will continue or face a correction. The interplay of various factors like central bank buying, private demand, currency fluctuations, and interest rate changes will likely influence the future trajectory of gold prices. Investors and analysts are closely watching these developments to gauge the next steps in the gold market.
