After a pullback at the end of April, gold saw bullish sentiment returning in the wake of Federal Reserve’s hint that rate cuts could be on the horizon, prompting precious metal analysts as well as ChatGPT to predict that prices could potentially exceed $3,000 by year’s end.
Fed Chair Jerome Powell reassurance, effectively ruling out further rate hikes, contributed to gold prices staying above $2,300. Lower interest rates further increase gold’s appeal as they typically reduce yields on fixed-income assets like bonds, analysts said.
Giving further momentum to the yellow metal’s rally are geopolitical unrest and a persistent central bank demand.
While strategists at Goldman Sachs believe there’s even more upside room for the safe-haven metal, saying it could potentially exceed $3,000 by year’s end, the AI is also positive about the precious metal’s prospects.
ChatGPT offered a substantially bullish forecast for gold at $2,450 by May-end that would propel prices to $3,000 per ounce by year-end.
Last week, gold briefly hit its lowest mark in nearly a month, yet succeeded in maintaining its position above support at $2,280. “Bulls will need to protect this floor fiercely; a lapse in defence could trigger a descent toward a key Fibonacci level at $2,260. Continued losses from this juncture would bring the 50-day simple moving average at $2,235 into play,” analysts said.
In the event of a bullish turnaround from present levels, the first technical hurdle to watch closely can be identified at $2,325, followed by $2,355. Although reclaiming this territory might pose some difficulty for buyers, a decisive breakout could pave the way for a rally towards $2,375 – a short-term descending trend-line originating from the record high.
Analysts said geopolitical tensions, particularly in the Middle East, have also boosted investor interest in the bullion. Gold is considered one of the oldest safe-haven assets, witnessing strong demand during times of geopolitical unrest and wars.
This year gold prices surged to new record levels, exceeding $2,400 an ounce last month due to increased global demand amid economic and geopolitical uncertainties.
One of the primary drivers of this price rally is the strong demand for gold from global central banks and Asian households. Chinese consumers and the People’s Bank of China (PBOC) continue to pursue gold avidly. The PBOC has increased its gold reserves for 17 consecutive months, with a 16 per cent rise in its gold holdings during this period, as reported by the World Gold Council. In March alone, the PBOC added 160,000 ounces of gold to its reserves.
Other countries, including India, Turkey, Kazakhstan, and some in Eastern Europe have been active gold buyers this year.
Strategists at Goldman Sachs maintained their base case projection that the precious metal will rise to $2,700 per troy ounce by the end of the year, reflecting a 17 per cent increase.
Using their model, which incorporates previous estimates of gold supply and demand elasticity, Goldman strategists also see potential for even higher gold prices under certain conditions.
Specifically, they predict that if US financial sanctions intensify at a pace similar to that since 2021, gold prices could climb an additional 16 per cent to $3,130 per troy ounce “on the back of additional central bank buying of 7Mtoz annually,” they wrote.
Goldman analysts estimate that if the US 5-year Credit Default Swap (CDS) spread widens by one standard deviation (13 basis points), gold prices could increase by an additional 14 per cent, reaching $3,080 per troy ounce, driven by central banks purchasing an additional 6 million troy ounces of gold annually.
Other experts, including Bloomberg’s senior commodity strategist Mike McGlone, also predicted the precious metal’s surge to $3,000 with the stock market and economic outlook remaining uncertain as geopolitical fears mount.