Gold prices seen moving towards record high as rate rises near end

Spot prices of the precious metal have risen above $1,900 an ounce, rising nearly 18% since early November as inflationary pressures eased and markets expect less aggressive monetary policy from the US Federal Reserve.

Rapidly rising interest rates hit gold prices last year, from a high of $2,069.89 in March to a low of $1,613.60 in September – just shy of a record peak in 2020.

Higher rates raised yields on bonds, made non-yielding gold less desirable to financial investors, and pushed the dollar to its strongest level in 20 years, making dollar-denominated gold expensive for many buyers. Gone.

Bank of America analysts said the weaker US currency and bond yields “will become a macro tailwind for the yellow metal, pushing gold above $2,000 an ounce in the coming months.”

With the dollar and bonds under pressure, investors are likely to buy bullion as a hedge against inflation and economic turbulence, said Nitesh Shah, analyst at WisdomTree.

Gold has traditionally been viewed as a safe place to store wealth. “The risk of central banks overdoing it and pushing their economies into recession is high,” Shah said.

Speculators betting on a fall in gold prices in November accumulated net long positions of 8.3 million ounces of gold, worth $16 billion, helping to prop up prices.

According to the World Gold Council, analysts expect central banks to continue hoarding gold after buying more of the metal in the first nine months of 2022 than in any year in half a century.

ANZ analysts said retail demand for gold bars and coins should also remain strong, boosted by a revival of economic growth in China, its biggest consumer market.

Analysts said gold could move very high in the near term and need to go short.

“Should prices decline from the current levels to the range of $1,870-1,900 an ounce, we expect the (upward) trend to reverse,” the bank said.

The text of this story is published from a wire agency feed without any modification.