With the arrival of the price of gold to a new historical maximum last week, above 2,685 dollars (USD) per ounce, expectations about its continuity have grown. “We raise our gold forecasts to $2,750 per ounce by the end of 2024,” Swiss investment bank UBS said in a report. This is because the price of the metal exceeded its end-of-year target ahead of schedulewhich was USD 2,600. So far in 2024, the price of the metal has risen 30%, setting new price records throughout the year, as the graph shows. “While it seems likely that some price consolidation will occur in the short term given the speed and magnitude of the rally, this year's setbacks have been superficial and brief,” they point out from UBS. That's why, expect gold's rise to continue.
Price of gold so far this year. Source: TradingView. With this situation, the bank also increased its forecasts for next year regarding the price of gold per ounce. Specifically, it changed its projection from USD 2,700 to USD 2,850 by mid-2025 and from USD 2,750 to USD 2,900 by the end of the third quarter of that year. This projection is similar to others recently given such as the listed fund company, VanEck, reported by BitcoinDynamic. According to his vision, the price of gold could reach USD 2,800 per ounce in the short term. UBS highlights that The price of the metal has historically risen up to 10% in the six months after the first interest rate cut in the United States that cuts with periods of increases. This grounds their bullish expectations for the remainder of the year and the beginning of the next. As seen below, the Federal Reserve (Fed), the Central Bank of the United States, cut interest rates in September for the first time in more than four years. This was also followed by this measure by China. In this way, the liquidity available to the markets increases, thus reflecting the need to boost the economy, which motivates the demand for gold. “As such, we anticipate even higher prices over the next 6 and 12 months driven by increased investment demand along with a drop in real rates in the United States, a seasonal recovery in jewelry consumption and continued purchases by banks. central,” say UBS analysts.
Demand for gold increases amid economic and political uncertainty
Gold has historically been an asset that investors tend to turn to in times of economic uncertainty.. It is for this reason that its demand usually increases, causing its price to rise, in the face of interest rate cuts. Furthermore, the Swiss bank highlights that the presidential elections in the United States scheduled for November are approaching, “which means more uncertainty.” Currently, expectations about who will win are disputed. On the Polymarket betting platform, 50% expect a victory for Kamala Harris and 49% for Donald Trump.
Betting on who will win the US presidential election. Polymarket.
Gold investment company Seabridge Gold also showed its bullish expectations for the metal before the UBS statement. Because foreigners are selling dollars and buying gold due to the reduction in interest rates, “USD 3,000 is at stake and soon,” he said. “Those who don't live in the US also have too many dollar assets for comfort, given runaway deficits, sanctions and a potential election catastrophe,” he added. Therefore, they anticipate that demand for the precious metal will continue to grow. It should also be noted that the slowdown in the labor market in the United States has been igniting fears of recession this year. Therefore, the next data that emerges in this regard could influence the price of gold, as well as bitcoin (BTC) and risk assets.
Bitcoin is considered by many as “digital gold” because it is also a scarce asset with decentralized mining, which facilitates its price increase due to demand. Furthermore, due to its resistance to censorship and the ability to store digitally and transfer freely at low cost, it is classified as even an improved version of metal. For this reason, the digital currency could also benefit from a scenario that boosts the metal if the narrative about “digital gold” grows. Currently, bitcoin is trading at 13% of its all-time high price recorded six months ago, since which time it has remained in a period of consolidation. On the other hand, demand in the stock markets tends to decline in periods of increases in the metal, although this is not the case at the moment. The S&P 500 (SPX), an index that includes the shares of the main 500 companies listed in the United States, reached new all-time high prices last week. In this way, there is an increase in demand for investments in general, something that could change as soon as there is more clarity about the economic and political future.