Rising inflationary pressures will increasingly weigh on the gold market. Ole Hansen, head of commodity strategy at Saxo Bank, said that while gold may come under selling pressure in the short term, he remains optimistic about the longer-term outlook. "We have repeatedly noted in recent months that both gold and silver are likely to remain stalled until we get a clearer picture of future rate cuts in the US," the expert said.
However, Hansen added that despite downside risks, robust physical demand in Asia is likely to support gold prices. "In the short term, gold is likely to struggle as expectations of a rate cut have diminished. Overall, however, I am interested to see how Chinese investors react to the small price decline in February. I believe that physical demand from Central Banks and retail investors, not least in China, will continue to provide support for the market," he said.
The expectation that the U.S. Federal Reserve will cut interest rates is likely to boost gold and silver prices in 2024, predicts major Swiss bank UBS, a forecast cited by CNBC.
"We assume that gold prices will rise due to Fed policy easing. This will also be accompanied by a weaker dollar," said Joni Teves, a precious metals strategist at the investment bank, who expects the gold price to rise to $2,200 an ounce by the end of this year.
While the timing and extent of interest rate cuts remain uncertain, UBS still expects the Federal Reserve to ease monetary policy. In addition, the appeal of gold as a safe haven asset has increased since the war between Israel and Hamas began on October 7.
That contributed to the gold price hitting an all-time high of $2,100 an ounce last month. "We believe investors will start building their gold holdings at a time when there is a lot of macroeconomic uncertainty and geopolitical risk," Teves said.
Analysts at Citi believe that the price of gold could rise to $ 3000 per ounce in the next 12-18 months, if one of three possible catalysts materializes.
According to Aakash Doshi, head of commodities research at Citi in North America, these three catalysts are a sharp increase in purchases by central banks, possible stagflation or a serious global recession.
The most likely driver on the path to $3,000 an ounce is a rapid acceleration of an existing but slow-moving trend: dedollarization among emerging market central banks, which in turn will lead to a crisis of confidence in the U.S. dollar, Citi analysts including Doshi wrote. This could double gold purchases by central banks and challenge jewelry consumption as the main driver of gold demand, the expert added.
Central banks' gold purchases "accelerated to record levels in recent years" as they seek to diversify their reserves and reduce credit risk, Citi notes. Central banks in China and Russia lead the way in gold purchases, but India, Turkey and Brazil have also increased their purchases. Central banks have bought more than 1,000 tons of net gold in the past two years. "If that doubles quickly to 2,000 tons, we think that would be very positive for the gold market," Doshi told CNBC.
Another trigger could be a "serious global recession" that could prompt the U.S. Federal Reserve to cut interest rates quickly. "That would mean that rates would be cut not to 3% but to 1% or less - that would take us to $3,000 an ounce," Doshi explained, noting, however, that such a scenario is unlikely.
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