Gold Surges Past $2,100, Signaling a New Era of High Prices

For the second day in a row, gold prices broke beyond $2,100 on Monday, as the world's appetite for metal looks certain to persist.

Analysts predicted that due to geopolitical unpredictability, a probable decline in the value of the US dollar, and potential interest rate reductions, gold prices would likely reach new heights in 2019 and stay over $2,000 levels.

The Israel-Palestine conflict has increased demand for the safe-haven asset, which has led to a two-month gain in yellow metal prices. Additional support has come from anticipation of interest rate decreases. Because it is a dependable store of wealth, gold typically does well in uncertain times, both economically and strategically.

UOB's Head of Markets Strategy, Global Economics, and Markets Research, Heng Koon How, expressed optimism about gold's prospects, citing the anticipated decline in both the USD and interest rates throughout 2024 as key positive drivers. In an email to CNBC, Heng estimated that gold prices could potentially reach up to $2,200 by the end of 2024.

Nicky Shiels, the Head of Metals Strategy at precious metals firm MKS PAMP, shares a bullish outlook on bullion. Shiels emphasized that there is less leverage compared to 2011 in the gold market, anticipating prices to surpass $2,100 and setting a target of $2,200 per ounce.

Prior to reversing some of its gains, spot gold prices increased on Monday to a fresh record high of $2,110.8 an ounce. At the moment, it is selling for $2,084.59.

Insights from LSEG Statistics and Analyst Predictions

According to LSEG statistics, gold reached $2,075.09 on Friday, surpassing a valuable intraday record high of $2,072.5 on August 7, 2020.

According to Bart Melek, head of commodities strategies at TD Securities, robust central bank purchases will be a major driver of gold prices rising to an average of $2,100 in the second quarter of 2024.

As they become less optimistic about the US dollar as a reserve asset, 24 percent of global central banks plan to boost their gold reserves in the upcoming year, according to a new World Gold Council study.

He also mentioned the possibility of a Fed policy change in 2024. Reduced interest rates often cause the currency to fall. When the dollar weakens, international buyers may purchase gold for less, which increases demand.

As inflation reached its greatest level in forty years in March 2022, the Fed began a series of rate rises that reduced the attraction of gold.

Increased interest rates reduce demand for gold, which has no interest, while bonds and other assets with greater returns become more profitable.

Analysts predicted a surge in gold prices when Fed Governor Christopher Waller stated on November 29 that he saw a relaxing policy if inflation readings continued to decline over the following three to five months.

Even though Fed Chairman Jerome Powell downplayed the likelihood of further strong rate reduction on Friday, his comments suggested the Fed could be finished raising rates for the time being.