Gold set for fresh highs ahead of Fed rate decision — analysts see prices at $3,000 by next year

Gold prices have been hitting new highs and analysts expect more records, with some forecasting the metal to hit $3,000 per ounce next year, as the U.S. Federal Reserve meeting draws closer.

Spot gold held steady at last session’s record high of $2,508.14 per ounce, according to data from FactSet, while U.S. gold futures jumped 0.16% to set a new record of $2,540.8 per ounce during Monday Asia hours, extending gains from Friday.

“2024 is the year where gold is supposed to reach multiple highs,” said Sabrin Chowdhury, head of commodities analysis at BMI, citing gold’s appeal as a safe haven asset. 

“Gold thrives from uncertainty… [and] uncertainty is at its peak,” she added, referring to 2024 being the year of elections, Ukraine’s recent incursion back into Russia and growing Middle East tensions.

Israel and Iran appear on the verge of a direct conflict after Iran vowed to retaliate following the assassination of Hamas political leader Ismail Haniyeh in Tehran earlier this month. Israel has placed its military on high alert, and the U.S. sent a carrier strike group and guided-missile submarine to the region to support its ally’s defense.

Another factor driving bullion prices is increasing chances of a Fed rate cut in September. July’s Fed meeting bolstered investor confidence that a rate cut next month is “on the table.”

“Once the Fed starts to cut rates, likely next month, gold could reach $2,700 an ounce,” said the BMI analyst. Other analysts share a similar bullish sentiment.

Lower interest rates reduce the opportunity cost of buying gold, making it more attractive, in relation to interest-bearing assets such as Treasurys, which compete with gold as a safe-haven offering.

Lower interest rates also pressure the dollar, making greenback-priced bullion attractive for holders of other currencies.

Gold investor sentiment looks set for the upside in the three to six months window, Citi analysts said in note on Monday. 

The bank added that they see a $3,000 per ounce target by the middle of 2025, and a fourth quarter average price forecast of $2,550 per ounce.

Traders will also be watching out for the annual economic policy symposium in Jackson Hole this week, which could offer greater clarity on the interest rate outlook, with Fed Chair Jerome Powell set to speak at the gathering.