Gold price breaks record high of $2,100: Experts predict bull run with falling interest rates

2023-12-11 22:16:00

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The price of gold has staged an impressive rally in recent weeks, which was topped off by a new record high on December 4th. For the first time in its history, the yellow precious metal broke the $2,100 mark. But things could continue to improve significantly, as some experts predict.

• Gold price breaks the $2,100 mark for the first time
• Many analysts expect another bull run due to falling interest rates
• Other experts warn: A lot of positive things have already been priced in

Over the past two months, the price of gold has only known one direction, namely north. While the precious metal was trading just above the $1,800 mark at the beginning of October, it reached a new record high on December 4th at a price of $2,152.30 per ounce. From this all-time record level, there has been a slight downward trend in the past few days as part of a small correction – but at a current price of $2,020.80 (as of December 8, 2023) per ounce, gold is up over 10 percent since the beginning of the year. According to some commodity analysts, gold may still offer high upside potential despite the recent upward move.

Falling interest rates are likely to play into the hands of gold investors

“I think gold is in the early stages of a bull market that is breaking out to new highs,” Mike McGlone, Bloomberg Intelligence Senior Macro Strategist, told Yahoo Finance. McGlone sees the prospect of falling key interest rates as a catalyst for a sustained rise in gold prices: The already falling interest rates on ten-year government bonds were probably the main reason for the gold rally. Gold, which pays no interest, becomes more popular over bonds when interest rates – and therefore bond yields – decrease. Accordingly, the key interest rate cuts generally expected for the coming year by various central banks such as the Fed, ECB, Bank of England, SNB & Co. are likely to have a positive effect on the gold price.

Michele Schneider: Gold will soon be at $3,000

Michele Schneider, partner and head of trading education and research at MarketGauge.com, is particularly optimistic. She believes that gold could soon reach $3,000. Schneider was impressed by the fact that gold has remained close to the $2,000 mark in the recent past despite “a stable dollar and higher interest rates.” Actually, both a strong US dollar and higher interest rates have a negative impact on the price of gold. Nevertheless, demand for gold as a “safe haven” remained at a high level – further price gains are therefore very likely in a macroeconomic environment that is more friendly for gold. Likewise, the geopolitical uncertainties surrounding the wars in Ukraine and the Middle East are likely to continue to drive gold buying interest.

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These analysts also continue to see upside potential

This is also how Heng Koon How, head of market strategy at UOB, sees it. “The expected decline in the dollar and interest rates in 2024 are the main positive factors for gold prices,” Heng Koon How said in an email to CNBC. He believes gold prices could reach as much as $2,200 per ounce by the end of 2024. Fundstrat expert Marc Newton is even more bullish and recently set $2,500 as his medium-term gold price target. Furthermore, the current massive purchases of gold by central banks are likely to provide a boost, as analyst Bart Melek, head of the raw materials strategy department at TD Securities, emphasized in the “CNBC” interview.

Which could speak against a gold price rally

However, not all analysts who follow the gold price expect the rally to continue. Among the skeptics is Rob Haworth, senior investment strategy director at US Bank Asset Management Group. “Lower interest rates, driven by investors’ hopes of Fed rate cuts in 2024, and a weaker dollar have provided some support over the past eight weeks,” says Rob Haworth, reflecting on recent market activity. Haworth then adds, according to Yahoo Finance: “A key question for bullish gold investors is whether these trends can continue. A still-growing U.S. economy and few signs that the Fed is considering rate cuts are likely to bolster near-term enthusiasm for gold Dampen gold.” If hopes of interest rate cuts next year prove premature, Haworth says this will likely weigh on gold prices. As a result, a lot of optimism has already been priced into gold.

Octavio Marenzi, CEO of Opimus, takes a similar approach. Marenzi warns investors not to chase the gold bull run and only stock up on the precious metal after the price gains. “The biggest mistake is to chase the market and get into the hot asset classes a day late after they have had a big rally and a big jump,” Marenzi told Yahoo Finance Live.

Gold price also dependent on developments on the inflation front

In addition to interest rate and dollar developments, the coming inflation figures will also have an important influence on the gold price. If the recently observed trend of lower price controls continues, the role of gold as a popular hedge against inflation is likely to decline. However, some market observers believe that it is still far too early to declare an end to the high inflation rates. For example, the Swiss stock market guru Marc Faber assumes that inflation rates will remain high in the long term, which is why he strongly recommends buying gold and silver and especially stocks from the precious metals sector. Robert Kiyosaki, author of the bestseller “Rich Dad, Poor Dad” (1997), sees it similarly to Faber and recommends not only buying gold and silver, but also Bitcoin.

There are therefore many factors – inflation rates, key interest rates, dollar performance, geopolitical environment, demand for gold from central banks – which influence the further development of the gold price. Ultimately, it is difficult to predict which factors will develop and how – but the fact is that gold investors’ interest in buying gold is currently at a high level.

Editorial team finanzen.net

Image source: Kotomiti Okuma / Shutterstock.com, Pics-xl / Shutterstock.com, filmfoto / Shutterstock.com, Lisa S. / Shutterstock

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