Skip to content
Finance — Investing

Gold Prices Trending Towards $5,000: Insights from Industry Analysts on the Yellow Metal Surge

Gold holdings in official reserves have surpassed 36,700 metric tonnes, accounting for approximately one quarter of the world's total gold reserves, as stated by the World Gold Council.

,   and  Administrator
2 min read
Gold's Potential to Hit $5,000: Industry Experts Discuss the Yellow Metal's Upward Trend
Gold's Potential to Hit $5,000: Industry Experts Discuss the Yellow Metal's Upward Trend

In a remarkable turn of events, gold prices have reached an all-time high of over $3,647 an ounce this week, marking a significant rally in the precious metal. This surge can be attributed to a series of factors, including the US Federal Reserve's rate cuts and the accelerated gold accumulation by emerging markets.

The US Federal Reserve's rate cuts are the immediate trigger for gold's latest rally. Traders expect as many as three reductions this year, with the first one potentially happening at the next Fed meeting. This monetary easing has led investors to seek safer havens, and gold, traditionally considered a safe asset, has benefited significantly.

Emerging markets are leading the charge in gold accumulation. Countries such as China, Russia, India, Turkey, and Kazakhstan have been expanding their gold holdings. This trend is sending a clear signal that trust in the dollar is eroding, as central banks buy gold at the fastest pace in modern history.

For the first time since 1996, central banks collectively hold more gold than US Treasuries. Official gold reserves now exceed 36,700 tonnes, about 27% of global reserves. This shift in preference towards gold is further underscored by the fact that if just one percent of private investments in US Treasuries shifted to gold, prices could approach $5,000, according to Goldman Sachs.

Goldman Sachs, a leading global investment bank, has declared gold as their highest-conviction long recommendation. They forecast the gold price to reach $3,700 by the end of 2025 and $4,000 by mid-2026. Analysts predict that gold's trajectory could soon push it beyond $4,000 and potentially towards $5,000 under certain conditions. The question of when gold will reach the next milestones, such as $4,000, is being debated among analysts, with some believing it could happen as early as 2026.

The scarcity of gold is another factor driving up its price. Supply constraints in the gold mining industry, such as declining ore grades and few new discoveries, are contributing to scarcity and premiums for bullion over paper contracts. Physical deliveries on exchanges are climbing due to this scarcity.

The US national debt has surpassed $37 trillion, with an increase of half a trillion dollars in a single month earlier this year. This escalating debt, coupled with increasing interest costs, which are now among Washington's fastest-growing expenses, has added to the appeal of gold as a safe haven.

Political pressure on the Federal Reserve is intensifying, and this uncertainty is also fuelling the demand for gold. In response to these developments, some countries, such as the UK and Australia, have revisited their gold strategies after years of neglect.

However, the role of the dollar in global finance has become more complex due to factors such as sanctions. These sanctions have weaponized the dollar's role, potentially leading to a systemic shift in the monetary order. Central banks are not just hedging risks, but preparing for this shift, according to a WGC analyst.

In conclusion, the surge in gold prices can be attributed to a combination of factors, including the US Federal Reserve's rate cuts, the erosion of trust in the dollar, and the scarcity of gold. As these trends continue, it is likely that gold prices will remain high and potentially reach new record highs in the near future.

Read also:

Related

Latest