Gold prices hit a new all-time high on Monday, leading gold price predictions through the roof as investors consider a new, potentially lucrative, inflation hedge.
What do you need to know about gold prices lately?
Well, gold prices reached $2,135 per ounce Monday, overshadowing its previous peak of $2,072 reached in August 2020. However, traders seem to be testing the new support level as prices have since eased back down to $2,028. Still, gold prices are up more than 10% year-to-date, even after dipping briefly into the red in October.
It seems gold has swung back in fashion in the wake of last week’s inflation data — and the resulting implication for interest rates. Indeed, the October Personal Consumption Expenditures (PCE) report released last week showed unchanged monthly inflation and annual price growth of just 3%. This has fueled speculation that the Federal Reserve may cut rates sooner than some would assume.
When rates fall — or are expected to fall — investors tend to pull out of Treasuries and into gold as lower interest rates make gold a comparably more attractive option. The yield on 10-year Treasuries has sunk from 5% in mid-October to its current 4.3% level. As expectations of rate cuts continue to grow, yields will likely continue to sink.
Rate cuts also tend to weaken the U.S. dollar, an additional driving force toward the more resistant yellow metal.
“The expectations of the end of the tightening cycle have been priced in, pushing longer-term yields lower,” noted Daria Efanova, Head of Research at Sucden Financial. “This has created a more favorable environment for gold as a non-yielding asset.”
Gold Price Predictions
With the notion of falling yields on the horizon, gold prices are expected to continue to climb.
Indeed, FXEmpire believes that gold may be on the precipice of a major rally. Indeed, the technical analysis website believes gold may surge to $3,000 should it break the $2,100 psychological barrier.
Bank of America feels similarly. In April, BofA predicted gold would rise to $2,200 an ounce in the fourth quarter of the year, a forecast that may yet be proven accurate, assuming this week’s rally has some legs to it.
Finally, WisdomTree is similarly bullish on gold. It forecasts gold prices could climb as high as 2,300 per ounce in 2024.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
