Gold has been the powerhouse of the broader economy, outpacing the stock market and even the tech sector. The yellow metal has put on an impressive performance with more than a 25% gain in 2024 before the fourth quarter even begins. Even as gold sits at an all-time high near $2,670/oz, ING experts predict the rally is just getting started. Analysts suggest the Federal Reserve’s aggressive rate cut strategy combined with deteriorating economic and geopolitical conditions on the world stage will push prices higher. Gold is even within striking distance of ING’s own price prediction of $2,700/oz, suggesting serious bullish momentum.
Gold’s Rally in Numbers
Gold prices have surged from $2,063 to over $2,670 thus far in 2024.
The yellow metal has notched an impressive 27% gain, outpacing the entire stock market.
Central bank gold demand hit a fresh record in the first half of 2024.
Gold ETFs have seen four consecutive months of net inflows this year.
Rate Cuts to Power the Next Leg of Gold’s Rally
After an extended period of high interest rates, the Fed has reversed course with a 50-basis point cut – one of the largest in recent history. Fiscal policymakers have already signaled an additional half-point reduction within 2024. According to ING, this aggressive monetary easing is expected to ignite the next leg of gold’s price rally. Gold prices pierced the $2,600 mark immediately following the rate cut announcement, lending credence to the research group’s prediction.
How do interest rates impact gold prices?
When interest rates are high, people tend to park their wealth in dollar-backed assets such as stocks and bonds due to decent yields. As rate cuts minimize returns in conventional instruments, there’s usually a rise in safe-haven demand. Experts are predicting this shift towards physical assets such as commodities will act as a boon to gold prices.
Strong Central Bank Demand Continues to Lift Gold
While ING points to rate cuts for a short-term boost in gold prices, central bank gold demand is expected to do the heavy lifting. Following three consecutive years of peak gold purchases, governments broke another record in the first half of 2024, proving the bears wrong. Due to the immense buying power of central banks, their demand is enough to keep prices elevated. While nations across the board are boosting their stockpiles, emerging markets are outpacing their wealthier counterparts. This gold focus comes as many nations, especially the BRICS countries, are preparing to untether from a lackluster dollar and shield against geopolitical risks.
ETF Inflows Signal Revived Investor Interest
While central banks are making headlines as the largest gold buyers, they’re not the only ones signaling that gold’s rally has more room to run. ING analysts point to the renewed inflows into gold exchange-traded funds (ETFs), a popular investment vehicle for institutions seeking gold exposure. After a period of declining demand, gold ETFs have now recorded four consecutive months of net inflows. This sharp reversal in demand indicates that institutional investors are increasingly moving back into gold, further fueling its upward momentum.
Why ING’s Forecast Matters for Investors
ING is among several prominent financial institutions forecasting a continued surge in gold prices. For instance, Bank of America recently urged investors to buy gold like central banks. These forecasts hold significance not just because they suggest higher gold prices, but because they reflect a broader macroeconomic landscape where safe-haven assets are gaining favor over traditional investments. The economy is transitioning into a phase of quantitative easing, persistent central bank gold demand, and increased geopolitical tensions – factors that make gold an increasingly appealing investment for those seeking to protect their wealth in uncertain times.
