Gold prices could reach $2,075 per ounce, an all-time high

Long-term gold production seen rising
Gold prices could reach $2,075 per ounce, an all-time high
Gold's safe-haven status is likely to retain strong appeal

Gold prices are expected to reach an all-time high of $2,075/oz in the coming months, according to research firm BMI in its latest report.

BMI cited the end of the US Federal Reserve’s rate hike cycle and global financial instability as reasons that could potentially elevate the prices of gold. That said, BMI remained cautious, saying it has been “neutral to bullish on gold prices since Q422, and remains so for the months ahead.”

The report also emphasized significant resistance to the projected price level due to the continued strength of the US dollar.

It will be recalled that BMI’s forecast for 2023 placed the price of gold at $1,950/oz. So far this year, gold prices have averaged $1,935/oz. The current price level stands at $1,955/oz as of mid-June.

In addition, BMI said global gold mine production will grow strongly over the long term. This is because high prices historically encourage investment and output.

“We expect global gold production to increase from 108.8moz in 2023 to 135.1moz by 2032. This would be an acceleration from the average growth of just 0.8% over 2016-2020,” the report said.

Read: Ukraine conflict supports gold prices despite rising bond yields

Market forces affecting gold prices

According to BMI, many other factors could influence the potential rise of gold prices, including:

Decreasing bond yields

As real bond yields decline, and rate expectations drop significantly, gold, being a non-yielding asset, is poised to gain support. BMI expects only one more 25-basis-point hike, taking the funds rate to a terminal rate of 5.50% in July 2023.

This outlook will likely sustain elevated gold prices throughout 2023 and 2024.

Weakening US dollar

The US dollar has experienced notable weakness since late 2022. Concurrently, other currencies such as the euro and pound sterling have shown relative improvement in their underlying fundamentals. As the terminal rate draws closer, the strength of the U.S. dollar is expected to wane, fostering increased interest in gold.

Recession concerns

BMI anticipates a slowdown in global real GDP growth from 3.1% in 2022 to 2.1% in 2023. Amidst this development, gold’s safe-haven status is likely to retain strong appeal, attracting investors seeking stability and protection against economic downturns.

Geopolitical volatility

BMI projects that the Russia-Ukraine conflict will persist at least until the second half of 2023. Additionally, tensions between the United States and China are set to intensify in response to US government policies. As a result, investor interest in gold is expected to remain elevated, driven by the desire for a safe investment haven during times of geopolitical turmoil.

BMI also adds that factors such as the easing of inflation rates and an acceleration in China’s GDP growth to 5.2% in 2023 will pose resistance for gold at the $2,075/oz level.

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