Analysts raise forecasts: Why the price of gold is rising and rising

Analysts raise forecasts
Why the price of gold goes up and up

March 13, 2024, 12:05 p.m

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The price of gold is breaking one record after another this year. Experts expect that the price of the precious metal can at least remain at a high level or even rise further. What or who is behind it?

For several weeks now, the price of gold has only trended in one direction: upwards. At the beginning of March it reached a record high of 2,195 US dollars per troy ounce (about 31.1 grams) on the London Stock Exchange, after surpassing the 2,000 dollar mark in mid-February. Calculated in euros, 2,006 euros were paid for an ounce at times, which is more than ever before.

Experts are confident that the price of the precious metal can remain at record levels above the $2,000 mark. The precious metal was recently traded slightly lower at $2,170. After the recent surge, prices remain just below record levels. “Gold prices have at least pressed the pause button,” commented Postbank experts. Why do experts assume that the price of gold will remain stable at a high level?

• High demand: Demand remains high even though investments in gold do not produce returns. One factor: the prospect of falling interest rates. The financial markets are firmly expecting major central banks to lower their key interest rates over the course of the year. The lower the capital market interest rates are, the more attractive buying gold becomes.
• US interest rate policy: Interest rate policy in the USA in particular plays an important role for the price of gold. After a series of disappointing economic data from the USA, speculation about falling interest rates by the US Federal Reserve Bank increased. There have also recently been increasing indications that the European Central Bank will also initiate its monetary policy change in June and lower interest rates again.
• Geopolitical risks: The prospect of falling capital market interest rates is met with increasing geopolitical risks. Investors traditionally value gold as a safe investment haven. The recent tensions in the Middle East with the threat to important shipping routes from the Houthi rebels from Yemen are therefore supporting demand for the yellow precious metal.
• Purchases by central banks: Gold purchases by central banks are also considered important price drivers on the gold market. “The central banks – and especially the Chinese central bank – were also on the buying side at the beginning of the year,” said Alexander Zumpfe, precious metals trader at Heraeus. This continues a trend that supported the price of gold last year. According to the World Gold Council, an industry association, central banks bought almost 1,040 tons of gold on the market during this time. “An important price driver remains central bank purchases, which increased significantly after the outbreak of war between Russia and Ukraine and the freezing of Russian assets in the West,” said an analysis by Dekabank.

Commodities expert Thu Lan Nguyen from Commerzbank does not expect the price of gold to fall significantly in the long term, although she does not rule out short-term profit-taking after the record hunt. At the same time, she sees limited upside potential. “We are therefore only raising our gold price forecast for the end of this year and the end of next year from $2,100 per troy ounce to $2,200,” said the Commerzbank expert.