Gold Hits New Highs; Analysts Predict More Records Ahead

Asset management firm Sprott Asset Management has stated that gold is entering a "new bullish phase" following its latest record high. Other analysts also predict that the price of gold will continue to climb to new heights.

Market strategist at Sprott Asset Management, Paul Wong, wrote in a report: "Driven by central bank buying, rising U.S. debt, and the potential peaking of the U.S. dollar, gold has entered a new bullish phase." The price of gold reached a new record of $2,700 per ounce on Monday.

Spot gold is currently trading at $2,729.14 per ounce, while the price of gold futures is at $2,741.20 per ounce.

Paul Wong continued: "Historically, the rise in the U.S. debt-to-GDP ratio, due to concerns about debt sustainability, currency devaluation, and debt monetization, has led to an increase in gold prices."

The Congressional Budget Office estimates that the proportion of public debt to GDP will rise from 98% in 2023 to 181% by 2053, reaching the highest level in U.S. history.

Paul Wong explained that as debt increases, governments may resort to printing money to address deficits, which could lead to currency devaluation. This erosion of trust in fiat currency enhances the appeal of gold as a reliable store of value.

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He added that ongoing inflationary pressures and challenging macroeconomic conditions plaguing the global economy indicate that central banks and investors are more likely to allocate to precious metals.

According to data from the World Gold Council, in the first half of 2024, central banks' net purchases of gold rose to 483 tons, 5% higher than the record set in the first half of 2023.

An increasing number of analysts predict that the price of gold will continue to rise to $3,000 per ounce, with some expecting it to break through $2,800 within the next three months.

Commodity strategist at Bank of America, Michael Widmer, stated that the price of gold "looks better than ever now. I think we are close to $3,000."Weidmer stated that the reason for his optimistic outlook is the brewing increase in government debt levels and geopolitical uncertainty. Israel and its rivals Hamas and Hezbollah have vowed to continue fighting in Gaza and Lebanon, making the hope for resolving the ongoing Middle East conflict dim.

Escalation of geopolitical tensions usually leads investors to flock to safe-haven assets such as gold to cushion against risks and instability in global markets. Citi analysts also insist that the price of gold will reach $3,000 within the next 6 to 9 months. They added that if oil prices soar due to recent escalations in the Middle East, the price of gold should rise.

Despite a decline in retail demand in China over the past three months, the price of gold has still performed "very well," reflecting buyers' willingness to pay higher prices. Meanwhile, Vivek Dhar of the Commonwealth Bank of Australia said in a report on Monday that he expects the average gold price to reach $3,000 in the fourth quarter of next year due to the "persistent weakness of the US dollar." However, Dhar said that he expects the average gold price to reach $2,800 this quarter. Citi recently raised its gold price forecast, also predicting that the price of gold will reach $2,800 within three months.