Gold prices surged to a new all-time high of $2347.58 an ounce, up $97.50 (4.3%) in a week, sparking debates among experts about what comes next. While optimists predict that gold could reach $3000/oz, pessimists are warning of a potential correction in the market. Three seasoned players in the field of gold-price forecasting, including Citi, Rosenberg Research, and Yardeni Research, are bullish on gold’s continued rise to $3000/oz.
However, some experts are cautioning about potential factors that could trigger a fall in gold prices, such as a strong U.S. dollar and the pace of future interest rate cuts. Bob Parker, a senior adviser with the International Capital Markets Association, has expressed concerns that fundamental factors may limit the upside potential for gold, leaving it vulnerable to a setback after its recent substantial increase of $530/oz (29%) over the past six months.
Various factors have been fueling the increase in gold prices, including private buyers seeking a safe haven amidst volatile financial markets and central banks increasing their exposure to gold to diversify from the U.S. dollar and other currencies. Notably, Costco, a major discount retailer, has started offering one-ounce gold bars alongside everyday items like breakfast cereal, shoes, and smartphones. Central bank buying has also played a significant role in driving up gold prices, with China’s central bank adding 160,000 ounces to its reserves in March, marking the 17th consecutive month of buying.
Despite concerns about a potential correction, banks like Citi remain optimistic about the rally continuing. In a research note to clients, Citi raised its price targets for gold and silver over the next three months to $2400/oz and $28/oz, respectively. The bank has set a bull case scenario of $3000/oz for gold and $32/oz for silver over the next six to twelve months. Citi attributes the upward momentum in gold prices to a combination of factors, such as the prospect of lower interest rates, flat demand for alternatives, geopolitical concerns, and strong financial buying alongside robust physical demand.
Overall, gold’s recent record-breaking rally has sparked both excitement and trepidation among investors and experts alike. While some foresee a continued rise towards $3000/oz, others are wary of potential risks that could trigger a market correction. The debate surrounding the future of gold prices is likely to intensify as various economic and geopolitical factors continue to influence market dynamics. Ultimately, only time will tell whether gold’s remarkable surge will be sustained or if a correction is looming on the horizon.
