Today, the gold price broke through the $2470/ounce mark. After experiencing a correction in June, the gold price has now stabilized at $2400 per ounce and hit a new historical high today. From mid March to mid May, the gold price has repeatedly broken historical highs. Experts believe that the rise in gold prices is influenced by factors such as the decline in the US dollar index, geopolitical risks, and rising market risk aversion.
Whether the Federal Reserve will cut interest rates in September will have an impact on gold prices. Analysis predicts that gold, as a non interest bearing asset, will benefit from the rate cut and is expected to rise to a price of $2600 per ounce by the end of the year. Analysts also suggest that if gold breaks through the resistance level of 2480, the maximum increase could reach $2660. But some experts also point out that although the long-term gold price is bullish, it is currently overvalued and there is a possibility of a pullback to $2000 per ounce.
Breaking through $2478, gold prices hit a new high again
On July 17th, gold prices hit a new historical high, with London spot gold prices closing above the $2478/ounce mark, breaking the high set at the end of May and opening as high as $2482.24/ounce at one point. Shenyin Wanguo stated that with the continuous slowdown of US employment data and lower than expected inflation in June, international gold prices have reached a new high.
The price of gold began to soar in early March this year, reaching a temporary high of $2135 per ounce on March 7th, and then began to decline after breaking through $2401.5 per ounce on April 12th. Subsequently, in June, the gold price weakened due to multiple factors, falling below $2300 per ounce at one point.
But industry analysis mostly predicts that the gold price is likely to rise in the medium to long term. In early April, analysts predicted that gold prices could surpass $2400 per ounce. On June 11th, when forecasting the trend of major asset classes in the second half of the year, China International Capital Corporation (CICC) pointed out that the price of gold is expected to climb to $2400 per ounce. Nowadays, gold has stabilized at $2400 per ounce.
The World Gold Council stated on July 11th that from mid March to mid May, gold prices have repeatedly hit historical highs. Since the beginning of the year, the gold price has risen by 12%, and for most of the second quarter, it has been above $2300 per ounce.
One of the main reasons for the historic high in gold prices is the decline of the US dollar index, as gold prices and the US dollar index have mostly shown a seesaw relationship. Recently, the US dollar index has declined, while gold prices have clearly risen. In addition, the US presidential election has also caused some market panic and safe haven demand, and global geopolitical risks remain high. A series of factors have worked together to push up gold prices, "Zhao Qingming, Vice President of the Information Technology Research Institute of the Asset Management, told Caixin reporters.
Gold prices are expected to rise to $2600 by the end of the year
The current market focus is on whether the Federal Reserve will cut interest rates in September, which will have a significant impact on gold prices.
The Office of the Investment Director of UBS Wealth Management pointed out that since March this year, some developed economies have started to cut interest rates. Although the United States missed the wave of interest rate cuts in the first half of the year, there has been a clear downward trend in inflation rates in recent months. The core CPI only slightly increased by 0.1% month on month in June, and the market expects the possibility of a rate cut in September to rise from around 70% before the release of CPI data to around 90%.
Gold, as a non interest bearing asset, will benefit from interest rate cuts and is also one of the best tools to hedge against uncertainties such as the US election, geopolitics, and US deficits, "said the Office of the Investment Director of UBS Wealth Management. The continued buying by the central bank will also support gold prices, which are expected to rise to $2600 per ounce by the end of the year.
Guohua Gold analyst Wang Yi told Caixin reporters that spot gold has gained support against the backdrop of the US dollar's decline. As for whether the gold price can further rise and break through the flag shaped pattern, the key lies in whether the US dollar index can break below the 104 level and the possibility of the Federal Reserve cutting interest rates in September. Due to the upward trend of the flag shape in the gold daily chart, the resistance level has extended to $2480.
It is expected that the Federal Reserve will cut interest rates from September to December, and if the gold price breaks through $2480, it will open up new upward space. Based on the extension ratio of the upward breakthrough, the maximum increase in gold price can be seen as $2660, and the primary condition is to break through the resistance level of $2480, "Wang Yi predicted.
But some analysts remain cautious about the $2600 price, believing that the gold price has already been overvalued this year. Zhao Qingming believes that looking back at historical gold prices, they have already been overvalued. The possibility of a price exceeding $2500 per ounce this year is higher, and reaching the level of $2600 per ounce is currently questionable. At the same time, it is not ruled out that the gold price may be affected and fall back to $2000 per ounce.
Looking ahead to the future, considering geopolitical risks and the ongoing quantitative easing by major central banks around the world, the overall trend of gold prices is still upward. However, this upward trend is not very flat, and there should be some volatility, and even a significant pullback at some stage, "said Zhao Qingming.