Wall Street Sees Gold Prices Heading Higher in 2024

As we enter the second half of 2024, major Wall Street firms are forecasting a significant upward movement in gold prices. This bullish sentiment is driven by a confluence of factors making gold an increasingly attractive investment.

Central banks are ramping up their gold purchases as a hedge against geopolitical and economic uncertainties. Lower interest rates diminish the opportunity cost of holding non-yielding assets like gold. Additionally, persistently high inflation continues to erode the purchasing power of paper currencies, further bolstering gold's appeal as a safe haven. With these dynamics at play, industry experts anticipate robust demand and a bright outlook for gold in the coming months.

Gold’s Performance So Far in 2024

Gold has performed strongly in 2024. Year-to-date, gold prices have seen significant gains. Prices hovered around $2,403.50 per ounce as of mid-July, up approximately 21.63% from the same time last year​​. However, there has been some recent volatility, with prices slightly retreating from a peak of around $2,463.80 earlier in July​.

In the last three months, gold's price has remained robust, reflecting ongoing geopolitical uncertainties, expectations of Federal Reserve rate cuts, and strong demand from central banks and investors​. Overall, the bullish sentiment towards gold remains intact. This has been driven by its role as a hedge against inflation and economic instability​.

The rising gold price in 2024 is part of a much longer trend.

Wall Street’s Gold Predictions

Citigroup

Citigroup has a price target of $3,000 per ounce for gold bullion. The analysts expect demand for gold to rise driven by purchases from central banks around the world adding to their gold reserves. They also point to increased inflows into gold exchange-traded funds (ETFs) to improve toward the second half of 2024 as the Federal Reserve is likely prepared to lower interest rates in September.

Bank of America

Bank of America has a similar forecast on gold prices. The bank believes gold could reach $3,000 per ounce over the next 12 to 18 months. Analysts are confident gold prices can go higher after reviewing the World Gold Council’s latest Central Bank survey. The survey confirms central banks are looking to increase their gold purchases.

Furthermore, they notice that as central banks increase their allocation to gold, they’re simultaneously reducing their share of U.S. dollars in their portfolios. According to the survey 29% of central bank respondents said they intend to increase their gold reserves over the next 12 months. That’s the highest level since the survey began in 2018.

Goldman Sachs

Goldman Sachs is bullish on gold, predicting a price of $2,700 per ounce by 2025. The firm's optimism is driven by expectations of potential Federal Reserve rate cuts and robust demand from China. Despite rising US interest rates, which typically lower gold prices, these factors have propelled gold to record highs.

China's market shows structural changes leading to a stable bull market for gold. Economic uncertainties and lower interest rates are increasing demand. Not to mention, the Chinese central bank's substantial gold purchases reflect concerns over US financial sanctions and the sustainability of US debt. Since mid-2022, central bank gold buying has tripled, further supporting gold's value.

Goldman Sachs anticipates a return of Western capital to the gold market due to potential Fed rate cuts. They see an enhanced long-term positive outlook for gold. This is despite short-term fluctuations in the Chinese market due to price sensitivity.

Reasons Behind Gold Purchases

Gold provides a way for central banks to diversify their foreign exchange reserves. This reduces dependence on any single currency, particularly the U.S. dollar, and mitigates risks associated with currency volatility.

Another major factor that influences central bank gold reserve decisions is geopolitical instability. In times of economic instability, gold is considered a safe-haven asset. Examples include as global recessions, trade tensions, or global conflicts. Gold's value tends to remain stable or even increase during turbulent times, making it an attractive option for preserving wealth.

Another ongoing factor is ongoing inflation concerns. Since the height of the pandemic, inflation has significantly decreased.

During the peak, in June 2022, the annual inflation rate in the U.S. reached approximately 9.1%. By June 2024, this rate had fallen to around 3.0%. This reduction marks a substantial decline from the pandemic's peak inflation levels. At the same time, inflation remains elevated and still exceeds the Fed's long-term target of 2%​.

Gold is often viewed as a hedge against inflation. As inflation erodes the purchasing power of paper currencies, gold's value generally rises. Thus offering protection against rising prices. While inflation has been moderating since the heights of the covid-19 pandemic, it's still elevated. This is why central banks are seeking protection against it.

Both this American Gold Eagle coin and PAMP Suisse Gold Bar are popular safe havens.

Moreover, since most of world trade is denominated in U.S. dollars, some countries are looking to reduce their reliance on the dollar for international trade and reserves. By increasing gold holdings, central banks can decrease their exposure to potential US economic and political actions that might impact the dollar.

In a low or negative interest rate environment, the opportunity cost of holding non-yielding assets like gold decreases. This makes gold more attractive compared to other assets that might offer lower or negative returns. There is nearly a 100% chance the Federal Reserve in the U.S. is prepared to start cutting interest rates in September. This supports Wall Street's argument that gold could rise towards the second half of 2024.

Gold Poised for More Gains

Wall Street's revised forecast for gold prices in the latter half of 2024 underscores a bullish outlook. These projections are fueled by substantial central bank purchases, persistent economic uncertainty, lower interest rates, and elevated inflation. This combination of factors has created a strong support base for gold, pushing its value to new heights.

Central banks continue to amass gold reserves as a safeguard against geopolitical and economic risks. Investors are seeking refuge in gold amidst fluctuating interest rates and inflationary pressures. As a result, the precious metal is set to maintain its upward trajectory. This optimistic projection reflects a broader trend of increased reliance on gold as a stable investment in an increasingly volatile global economic landscape.

Written by Paulina Likos

Read more about the precious metals markets from the experts at Gainesville Coins:

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