Gold on the Rise

July 2, 2024

Gold Prices Set to Continue Their Climb

As we turn the page on another quarter, the precious metals market continues to shine. In a remarkable display of resilience and strength, gold has once again shattered records, closing the second quarter at an unprecedented high. This marks the third consecutive quarter of record-breaking closings. Gold ended the week at a staggering $2,336 per ounce. The commodity has surged more than 5% since the end of the first quarter. When compared to the same period last year, gold prices have skyrocketed by an impressive 21%. With analysts predicting another surge, the question now is just how high can gold go?¹

Gold Allocations Up

The World Gold Council released their annual Gold Perceptions Survey. According to it, 85% of investors hold some gold. That is up from 69% in 2018. Twenty nine percent expect to increase their gold holdings in the next 12 to 18 months. Gold holdings are increasing for familiar reasons. Most respondents cite gold’s value as a portfolio diversifier and inflation hedge. These same factors would also drive future gold purchases.²

Interestingly, the survey found that gold owners aren’t aware of all the benefits precious metals provide. Most did not know that gold has outperformed US equities over the last 25 years with its 8% annual return. They also did not know how highly liquid gold is as an asset. The World Gold Council believes that once these facts are better known, the demand for gold will increase.

Gold Demand Sources

Central bank is demand continues to be strong. Gold was sought as a hedge against inflation and sanctions. The People’s Bank of China has been on a gold buying spree. They had the largest ever annual increase last year. But now, central banks are also looking to reduce their exposure to US Treasuries.

The growing US debt is making Treasuries seem much riskier to central bank investors. The higher the debt goes, the harder it becomes for other nations to finance it. As the Presidential election approaches, neither party has a practical plan for tackling the debt. A Bank of America commodity analyst said that the US Treasury market is one shock away from “not functioning seamlessly. ”

While gold’s price increase is largely attributed to central bank purchases, retail investment is on the rise. Chinese retail demand grew 10% in 2023. The Chinese population is seeking safe haven assets as the rest of their economy, largely real estate and equities, tank. ⁴

Western institutional investors are predicted to be the next big driver of gold demand. Heightened global uncertainty, geopolitical tensions, and sky-high stock prices could help explain why most American investors are planning to maintain or increase their gold holdings.

Gold is historically under-owned in North America. American retail investors could send the price of gold skyrocketing. The Bank of America sees American retail investors jumping into gold once the Fed cuts interest rates. Those cuts are most likely to occur at the end of 2024. This gives potential buyers a window of opportunity. B of A analysts see gold hitting $3,000 an ounce in the next 12 to 18 months.⁵

Alain Corbani is the Head of Mining and Fund Manager at Montbleu Finance. He said, “Gold can go much higher, and $3,000 is far from being far-fetched…Each time the Fed pauses, then we reverse into lower rates. Gold goes up by 50%. So, just run the numbers. $2,000, 50% of $2,000, you get your $3,000.” This projection is supported by historical trends where gold prices surged following Federal Reserve rate pauses.⁶

Gold ‘s Limited Downside

Gold built a solid floor at $2,000 an ounce at the beginning of the year. Seven months later, that floor is up to $2,200. Joy Yang is Head of Index Product Management at MarketVector Indexes. She said, “Gold is definitely in a new comfortable range, and I just don’t see it going below $2,200 again. In another couple of months, I expect we could see that floor move up to $2,400. I just don’t see the risks and factors driving gold really going anywhere in the next few years.” She added that gold is not an exciting momentum trade like Nvidia or meme stocks. Gold is means as a long-term store of value during market volatility. ⁷

Conclusion

Gold is holding steady at a new record high. Demand is strong from central bank buying and international retail investment. Analysts predict that when the Fed commits to cutting interest rates, Western investment will surge, sparking a new rally in gold. Now is an opportune time to gain the wealth protection benefits of physical precious metals before the prices go up again. A Gold IRA from American Hartford Gold offers long-term portfolio protection from inflation and the debt crisis. Contact us today at 800-462-0071 to learn more.