Gold prices ended Thursday higher despite the Fed’s hawkish stance on monetary policy. Analysts were focused on a “confluence of factors” that could push gold prices to or above record highs.
Adam Koos, president of Libertas Wealth Management Group, said the US central bank’s latest announcement sent a “ripple” through the gold market.
Gold futures fell by as much as 1% overnight on the Comex market to $2,046.40 per ounce. April contract
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It has since traded at a high of $2,083.20, not far from the all-time high settlement of $2,093.10 for the most active contract reached on Dec. 27, according to FactSet data. April gold prices rose $3.70, or 0.2%, to settle at $2,071.10 an ounce on Thursday.
Federal Reserve Chairman Jerome Powell on Wednesday shot down expectations that the central bank would start cutting interest rates in March.
The Federal Open Market Committee has taken a more “patient approach” [interest] Peter Spina, president of GoldSeek.com, said Mr. Tempering wants to cut rates sooner rather than later.
He said the resilience of the gold market was supported by central bank buying.
In a report released Wednesdaythe World Gold Council said central banks’ gold purchases continued at a “breakneck pace”, with annual net purchases of 1,037 tonnes, almost matching the 2022 record, just 45 tonnes short. Ta.
Koos said central banks are “hoarding gold like a treasure hunt, with their insatiable appetite driving up the price of gold despite strong headwinds such as soaring bond yields and a ‘ridiculously strong’ dollar.” “I’m here.”
Gold futures have consistently settled above the psychologically important $2,000 level since around mid-December.
Spina said gold is “firmly on the starting point” and expects the price to reach new record highs in the coming months.
He said that while “indicators of general sentiment do not suggest gold is near all-time highs,” futures prices are little changed from last year’s close, which is “typical of a stealth gold bullish move.” ”.
Spina said the stealth gold bull move is “quietly occurring, with the excitement phase of the bull market coming firmly into record price territory later on.”
He predicted that for those shorting the gold market, “dreams of further price declines will disappear, and instead…become fodder for bulls’ short covering” and that “there are many catalysts for gold prices to rise.” There is.
Koos cited “multiple factors” that are likely to push gold prices to new all-time highs later this year, including possible Fed easing, a weaker dollar, and “global economic uncertainty will never end. “This includes sustained demand for safe assets, although this is not visible.” To leave. ”
Expectations that the Fed would soon cut interest rates contributed to a record high in gold settlement volumes in late December, but analysts say demand for the precious metal as a safe haven continues to grow, especially in the backdrop of wars in the Middle East. We are also noticing that it is increasing.
“Geopolitical tensions and conflicts are widespread. Risks are increasing and this is causing many BRICS countries to increasingly build up gold reserves,” Spina said.
Additionally, demand for gold from China remains strong and is expected to increase further as the Lunar New Year approaches.
Adrian Ash, research director at BullionVault, said China is the largest gold miner, importer, central bank purchaser and household consumer, but always around the Lunar New Year. Demand for gold jewelry and investment will soar. Chinese New Year begins on February 10th and celebrations last up to 16 days. According to Chinese New Year Net.
“China’s surging demand for gold shows no signs of slowing down,” Asch said in an emailed commentary this week.
He noted that gold is priced in the Chinese yuan currency.
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That’s up 44% since the eve of the coronavirus pandemic, and up by a fifth over last year. Moreover, Chinese household gold demand surged 24% in US dollar terms in 2023 to a record $56 billion, he added.
Ash said Chinese New Year demand is likely to break new records in the Year of the Dragon. Gold is considered a symbol of good luck and is often purchased as a gift for the holidays.
Asch said Western investors who want to start adding to their bullion holdings in the hopes of seeing gold prices fall should do so when Shanghai markets close on February 9 for China’s week-long Lunar New Year holiday. “There’s a good chance I’ll get a chance,” he said.
Looking further ahead, he said it was unlikely that gold prices would fall significantly this year.
According to Ash, the bullion market has increased by 2,000 yen due to “relentless central bank demand spurred by today’s dire geopolitical tensions, as well as massive household demand driven by China’s poor fiscal and economic outlook.” The pair has found strong support above the dollar.
