Gold prices seen rising towards record highs as rate rises near end
An ingot of 99.99 percent pure gold is cast at the Krastsvetmet non-ferrous metals plant in the Siberian city of Krasnoyarsk, Russia March 10, 2022. REUTERS/Alexander Manzyuk/File Photo
Peter Hobson @ Reuters
LONDON, Jan 16 (Reuters) - Gold prices are expected to rise towards record highs above $2,000 an ounce this year, albeit with a little turbulence, as the United States slows the pace of rate hikes and eventually stops increasing them, according to industry analysts.
Spot prices of the precious metal have shot above $1,900 an ounce, surging by about 18% since early November as inflationary pressures recede and markets anticipate less aggressive monetary policy from the U.S. Federal Reserve.
The weakening U.S. currency and bond yields "will become macro tailwinds for the yellow metal, pushing gold above $2,000/oz in the coming months," said analysts at Bank of America.
With less pressure from the dollar and bonds, investors are likely to buy bullion as a hedge against inflation and economic turbulence, said WisdomTree analyst Nitesh Shah, adding that prices could easily move above $2,100 an ounce by year-end.
Gold is traditionally seen as a safe place to store wealth. "The risk of central banks overdoing it and pushing their economies into recession is high," said Shah.
Speculators who in November were betting gold prices would fall have amassed a net long position in COMEX futures of 8.3 million ounces of gold, worth $16 billion, helping push up prices.
Analysts expect central banks to continue stockpiling gold after buying more metal in the first nine months of 2022 than in any year in half a century, according to the World Gold Council.
Retail demand for gold bars and coins should also remain strong, boosted by a revival of economic growth in China, the biggest consumer market, said analysts at ANZ.
