International gold price expected to continue rising: analysts

(ECNS) –The international gold price maintained its upward trajectory, recording new highs on Friday, driven by factors including U.S. Federal Reserve policy shifts, geopolitical tensions, and increasing demand among central banks, with analysts predicting continued bullish sentiment amid expectations of a rate cut and safe-haven appeal. 

COMEX gold futures for June closed 1.76 percent on Friday, reaching a staggering $2,349.1 per ounce. This marks another milestone in the relentless climb of gold prices, which have risen by over 14 percent since March.

Currently, the retail price of domestic gold jewelry from across China has surpassed 700 yuan (about $96.77) per gram.

“The currently rapid rise in gold prices began in early March when ISM Manufacturing PMI statistics came out significantly below expectations. Subsequently, Federal Reserve Board Governor Christopher Waller mentioned the reduction of MBS holdings while increasing Treasury holdings, further fueling market expectations of the Fed’s implicit easing of monetary policy, thereby driving the gold price upwards,” said Wang Yanqing, chief researcher of precious metals at China Futures. 

U.S. economic statistics like rising unemployment, declining PCE price index, and lower-than-expected retail sales, confirmed that the resilience of the U.S. economy is diminishing, boosting expectations for the Fed’s rate cut in June and supporting the rise of gold prices. 

Duan Endian, a senior researcher of precious metals at Dayou Futures, believes international gold prices are rising due to rate-cut expectations and safe-haven demand. Continued high interest rates are pressuring the U.S. economy, leading to speculation of interest rate cuts.

Financial risks in U.S. banking also increased demand for safe-haven assets, he added. 

Wang Qing, a chief macro analyst at Golden Credit Rating, insisted that there were three main reasons for the continuous rise in gold prices.

First, the expectation of a Fed rate cut has increased demand for gold. Second, many central banks have been increasing their gold reserves due to geopolitical risks and uncertainty in global trade, which accounts for about 25 percent of the overall market demand. Third, a surge in public interest in buying gold since the Spring Festival is driven by seasonal consumption demand, market volatility, and the investment attributes of gold. 

Central banks worldwide continue to increase gold reserves. Data from the People’s Bank of China shows that as of the end of February this year, Chinese gold reserves were 72.58 million ounces, an increase of 390,000 ounces compared to the previous month, marking an increase for 16 consecutive months.

Data from the World Gold Council shows that in January 2024, global official gold reserves increased by 39 tons, with central banks of countries such as Turkey, India, Kazakhstan, and Jordan increasing their gold reserves. 

“The purpose of multiple central banks increasing gold reserves is to achieve reserve diversification and change the dominance of the U.S. dollar”, said Wang Lixin, CEO of the World Gold Council China.

Based on long-term construction needs, financial products in central bank reserves need to meet the dual requirements of security and liquidity.

In addition, to aid the transparency and standardization of gold prices and transactions, central banks will regard gold as an important component of central reserves. 

Concerns over potential cyclical weaknesses in the U.S. economy make it difficult for U.S. bond yields to maintain a high level, market sentiment therefore, remaining bullish on gold, according to Duan.

Nonetheless, amid prevailing economic uncertainties and geopolitical instabilities, gold is expected to retain its status as a safe-haven asset, garnering sustained attention from investors seeking stability and portfolio diversification, Duan stressed. 

While uncertainties persist, the trajectory of international gold prices may continue its upward surge. However, analysts caution that the pace of price appreciation may moderate once the Federal Reserve implements its anticipated rate cut, dampening inflationary concerns and potentially tempering demand for gold as an inflation hedge, Wang Qing concluded.