Gold price (XAU/USD) hit multiple all-time highs in March and April 2024, as investors turned towards the safe haven asset, headlined by anticipated Fed rate cuts in June. The commodity set a new all-time high of $2431 per ounce on April 12th at the spot market, but has since declined to $2334 as of this writing. The safe haven demand for the precious metal has declined since mid-April after Israel and Iran cooled their war rhetoric.
The yellow metal’s uptrend in 2024 started in earnest in mid-February, as the market became increasingly convinced of Fed rate cuts in June 2024. The yellow metal rose on 25th and 26th April, as the market speculated the likelihood that the BoJ would be selling US dollars to ease pressure on the yen. While the BoJ is yet to comment on the speculations, the USDJPY hit 34-year lows of 160.20 on Monday, raising the possibility of such an intervention. This could provide tailwinds to gold this week as the market waits for US Nonfarm payrolls data.
XAU/USD under pressure from strong dollar fundamentals
The US dollar has strengthened significantly major world currencies, over the last week, with the DXY index going above 106.00 for the first time in 2024. Last week, the DXY index, which weighs the greenback against a composite of six other currencies, fell below 103.00 for the first time in two months.
The US economy has printed out multiple strong data, underlined by strong employment figures. However, inflation remains stubbornly high above 3%. exceeding the Fed’s target 2%.
Falling Treasury yields a source of headwinds for gold price
US Treasuries are substitutes for gold as far as safe-haven investments go, and falling rates on these assets have tilted the scales in favour of the yellow metal. As of this writing, yields on the benchmark 5-year and 10-year bonds have risen above 4.630%. This will likely continue exerting downward pressure on the XAUUSD trading pair in the near-to-middle term.
Please note that the original article was published in September 2022. However, we update it regularly to incorporate all the latest information. You are also welcome to join my free Telegram group for up-to-date analysis on Gold & Bitcoin.
Gold news
The US dollar sits precariously after the US economy grew slower than expected in the first quarter of 2024. Therefore, a miss by the April NFP jobs data would increase the downward pressure on the commodity. The US economy grew by 1.6 % in the first quarter of 2024, substantially lower than the consensus forecast rate of 2.5%. This has raised concerns that the current high interest rates are hurting the US economy, and that could push the Fed to shave the rates in the second half of the year.
The US central bank is expected to make its interest rate decision on May 1, but the market largely expects the current 5.50% rate to remain in place. Elsewhere, yields on benchmark 10-year US treasury bonds have been hovering above 4.600 in recent weeks, and that will continue bringing headwinds gold’s way.
Elsewhere, China’s central bank increased its gold imports for the 17th straight month in March, adding 160,000 troy ounces to its vault. Furthermore, the world’s second-largest economy recently lifted restrictions on gold imports as safe haven demand rose amid a troubled property market. These developments have combined to provide upside propulsion to gold prices and will likely continue to provide support in the mid-term.
XAU/USD And Its Correlation With The DXY Index
The dollar strength index tracks the strength of the USD against a basket of major global currencies. This index has recently broken its uptrend and is now gaining downward momentum. In the event the DXY index drops below 100 points, it is very hard to see Gold below a new ATH.
The gold price chart has been historically inversely correlated to the DXY index. However, the two largely followed the same upward trajectory since early March, with neither relenting. However, the US dollar emerged the stronger of the two in the second half of April, as safe haven demand for gold fell. The DXY has stayed above 105.00 since 11 April, signifying the underlying strong dollar demand.
Gold Price Historical Chart
In August 2020, the gold price rallied to an all-time high of $2,072.85, surpassing the previous record high of $1,924.77 it hit nine years before. With the subsequent decline, the psychologically crucial zone of $2,000 has remained evasive. However, it has remained above $1,600 since rising above it at the peak of the coronavirus pandemic in April 2020.
Gold price crashed to $1,616 on September 28, 2022. This price was about 21.88% from its highest point in 2022. This crash coincided with a period when the Federal Reserve was hiking interest rates aggressively in a bid to fight soaring inflation. It then started rising after signs emerged that inflation was starting to ease in the US.
Bullion has performed really well this year. The precious metal soared by more than 8% since mid-February 2024, but the RSI currently signals that it is overbought. This could slow down gains in the near term, but does not rule out new gold price all-time-highs.
Gold Price Forecast & Latest Analysis Analysis
I accurately predicted that gold would go past the $2,000 mark in my previous forecasts.
As the price now seems to have gained strength above $2303, the path of least resistance is a new all-time highs above $2,431. Safe haven buying the biggest contributor to this bullish outlook. However, gold prices face significant downward pressure from a strong US dollar that has seen the DXY index above 106 as of this writing. In addition, yields on US Treasuries have added to the pressure, with benchmark 5-year and 10-year bonds above 4.630% as of this writing.
I’ll keep posting my updated outlook on Gold and other assets in my free Telegram group, which you’re welcome to join.
Gold Price Forecast 2025
The gold price forecast 2025 is largely an extrapolation of the influential factors in the current year. At the beginning of the year, Goldman Sachs indicated that the commodities bull market observed in the past year will likely continue into the current year and beyond. Indeed, the investment bank holds that the commodities supercycle will last for about 10 years.
The precious metal may reach new all-time highs above $2,200 an ounce based on this narrative. In addition, aIn addition, a tighter Fed policy and subsequent decline in economic growth will likely boost its performance as a risk-on asset.
However, even with the bullish gold price forecast 2025, competition from Bitcoin as a store of value may limit its upward potential.
Gold Price Forecast 2030
A feasible gold price forecast 2030 is founded on US dollar movements due to the existing inverse correlation. In the event of geopolitical tensions, gold may find some support in its status as a safe haven. However, its upward momentum may be limited by a rise in the demand for the greenback.
Over the past eight years, gold price has risen by about 60%. However, an assumption that the bull market will continue over the next eight years makes a surge of 50% viable. In that case, the gold price forecast for 2030 will be for the precious metal to hit a high of about $2,700 an ounce.
How to invest in gold
One of the viable ways to invest in gold is by buying bullion. It may be in coins or bars, certified with purity and weight have. Then, one can purchase or sell the physical gold to a reputable dealer. However, security reasons often lead some investors to embrace the route of futures and options.
Best gold stocks to invest in
One of the best ways to invest in gold is through stocks. In the past few years, mergers and acquisitions in the sector has led to a significant consolidation in the sector. Today, only a few large companies dominate the industry.
Barrick Gold, a company valued at $30 billion, is one of the best gold stocks to invest in. Its stock has dropped by about 7.95%. The other excellent stock to buy is Wheaton Precious Metals, which is worth over $17 billion. Unlike other gold companies, Wheaton does not do the real mining. Instead, the company has purchased rights for key gold assets.
The other best gold stocks to invest in are Franco-Nevada, Newmont Corporation, and Agnico Eagle mine. The chart below shows the performance of some of the biggest gold stocks in the industry.
Gold futures
Futures are a contract in which one agrees to buy or sell the financial asset at the agreed-upon price before the expiry of the contract. For options, the investor has a chance and not an obligation to buy or sell the underlying instrument for as long as the contract is valid. To invest in gold via futures and options, one needs an account with a reputable financial broker. It is possible to trade in gold for a commission through the brokerage account.
Gold ETFs
ETFs and mutual funds are yet another viable way to invest in gold. A share of this financial instrument represents a specific amount of gold. One needs a brokerage account to trade in gold ETFs or mutual funds, like in futures and options.
In addition to the aforementioned ways of investing in gold, an investor can consider buying stocks of gold mining companies like Barrick Gold Corp. (GOLD) or Newmont Corp. (NEM). While the share price is usually correlated to gold price, the firm’s fundamentals are also influential.
The chart below shows two of the most popular gold ETFs, the iShares Gold Trust and SPDR Gold Trust. As you can see, these ETF tend to move in sync with gold prices.
Summary
As was the case in 2021, gold’s relation with inflation has mixed. In 2024, the trend will likely continue as inflationary pressures continue to boost the precious metal. In addition, geopolitical tension in the Middle East and the Russia-Ukraine war will continue providing safe haven tailwinds. Nonetheless, an environment of higher interest rates may curb its upward potential.