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Gold, a safe-haven investment during a challenging period, has been trending upward, encouraging calls for a surge in the commodity’s price to reach its price peak.
The price of the yellow commodity has been ascending amid rising geopolitical tensions in the Middle East, the increasing probability of an interest rate cut by the Fed and central banks increasing their purchase of the precious metal.
Rate Cut Likelihood Grows
With projections of one rate cut later in 2024, investing in gold becomes more attractive. The recent inflation data has ignited market expectations of interest rate cuts this year, with a likelihood of 61.1% that the Fed might lower the rate to 5-5.25% in September, according to the CME FedWatch Tool.
With a probability of 45.2% of the interest rates falling to 4.75-5% in December, the long-term treasury rates may start declining, making gold more appealing to investors compared to bonds.
Gold to Rise on Greenback Slide?
Gold prices are inversely related to the value of the U.S. dollar as gold is priced in dollars. A weaker U.S. dollar generally leads to higher demand for gold, pushing its price upward as it becomes more affordable for buyers holding other currencies.
If the Fed goes ahead with a rate cut, the greenback may lose its strength. As the U.S. dollar weakens toward the end of 2024 and into 2025, the price of the yellow commodity may surge further.
Optimistic Price Forecast
According to the commodity analysts at Bank of America, as quoted on the Barchart, the price for the yellow commodity is forecast to cross $3,000 per ounce in the coming 12 to 18 months, driven by expected interest rate cuts by the Fed and ongoing central bank purchases.
Rising Central Bank Interest in the Precious Metal
According to the Business Standard, central banks of advanced economies are planning on increasing their share of the precious metal, mirroring the stance of emerging economies in purchasing the metal.
Based on a survey by the World Gold Council, as quoted on the Business Standard, nearly 60% of these banks foresee a rise in gold's allocation over the next five years, up from 38% last year.
Per the Financial Times, as quoted on the Business Standard, approximately 13% of advanced economies are set to boost their gold holdings in the coming year, marking a rise from about 8% last year.
This estimate is supported by the People’s Bank of China diversifying its foreign reserves by increasing gold holdings by 8 million ounces ($51 billion) since January 2023, raising gold's share in China’s total reserves from 3.5% in December 2022 to 4.9% in April 2024, according to Business Insider.
Nearly 56% of advanced economies anticipate a decrease in the dollar's global reserve share over the next five years, up from 46% last year. Among emerging market central banks, 64% share this view, suggesting a potential shift toward diversifying portfolios with increased investments in gold, pushing up its demand and price.
ETFs in Focus
Across extended investment periods, gold preserves its purchasing power, outpacing inflation and contributing significant diversification to an investment portfolio due to its historical tendency to have a negative correlation with other asset classes.
Increasing chances of a rate cut, a weakening greenback and central banks ramping up their gold purchases could potentially drive investments into physically backed gold ETFs.
Below, we highlight a few funds.
SPDR Gold Shares (GLD - Free Report) has gained 14.55% over the past three months and 19.07% over the past year.
iShares Gold Trust (IAU - Free Report) has gained 14.59% over the past three months and 19.24% over the past year.
SPDR Gold MiniShares Trust (GLDM - Free Report) has gained 14.63% over the past three months and 19.42% over the past year.
abrdn Physical Gold Shares ETF (SGOL - Free Report) has gained 14.61% over the past three months and 19.34% over the past year.
Goldman Sachs Physical Gold ETF (AAAU - Free Report) has gained 14.60% over the past three months and 19.30% over the past year.
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Gold Set to Break $3,000? ETFs to Consider
Gold, a safe-haven investment during a challenging period, has been trending upward, encouraging calls for a surge in the commodity’s price to reach its price peak.
The price of the yellow commodity has been ascending amid rising geopolitical tensions in the Middle East, the increasing probability of an interest rate cut by the Fed and central banks increasing their purchase of the precious metal.
Rate Cut Likelihood Grows
With projections of one rate cut later in 2024, investing in gold becomes more attractive. The recent inflation data has ignited market expectations of interest rate cuts this year, with a likelihood of 61.1% that the Fed might lower the rate to 5-5.25% in September, according to the CME FedWatch Tool.
With a probability of 45.2% of the interest rates falling to 4.75-5% in December, the long-term treasury rates may start declining, making gold more appealing to investors compared to bonds.
Gold to Rise on Greenback Slide?
Gold prices are inversely related to the value of the U.S. dollar as gold is priced in dollars. A weaker U.S. dollar generally leads to higher demand for gold, pushing its price upward as it becomes more affordable for buyers holding other currencies.
If the Fed goes ahead with a rate cut, the greenback may lose its strength. As the U.S. dollar weakens toward the end of 2024 and into 2025, the price of the yellow commodity may surge further.
Optimistic Price Forecast
According to the commodity analysts at Bank of America, as quoted on the Barchart, the price for the yellow commodity is forecast to cross $3,000 per ounce in the coming 12 to 18 months, driven by expected interest rate cuts by the Fed and ongoing central bank purchases.
Rising Central Bank Interest in the Precious Metal
According to the Business Standard, central banks of advanced economies are planning on increasing their share of the precious metal, mirroring the stance of emerging economies in purchasing the metal.
Based on a survey by the World Gold Council, as quoted on the Business Standard, nearly 60% of these banks foresee a rise in gold's allocation over the next five years, up from 38% last year.
Per the Financial Times, as quoted on the Business Standard, approximately 13% of advanced economies are set to boost their gold holdings in the coming year, marking a rise from about 8% last year.
This estimate is supported by the People’s Bank of China diversifying its foreign reserves by increasing gold holdings by 8 million ounces ($51 billion) since January 2023, raising gold's share in China’s total reserves from 3.5% in December 2022 to 4.9% in April 2024, according to Business Insider.
Nearly 56% of advanced economies anticipate a decrease in the dollar's global reserve share over the next five years, up from 46% last year. Among emerging market central banks, 64% share this view, suggesting a potential shift toward diversifying portfolios with increased investments in gold, pushing up its demand and price.
ETFs in Focus
Across extended investment periods, gold preserves its purchasing power, outpacing inflation and contributing significant diversification to an investment portfolio due to its historical tendency to have a negative correlation with other asset classes.
Increasing chances of a rate cut, a weakening greenback and central banks ramping up their gold purchases could potentially drive investments into physically backed gold ETFs.
Below, we highlight a few funds.
SPDR Gold Shares (GLD - Free Report) has gained 14.55% over the past three months and 19.07% over the past year.
iShares Gold Trust (IAU - Free Report) has gained 14.59% over the past three months and 19.24% over the past year.
SPDR Gold MiniShares Trust (GLDM - Free Report) has gained 14.63% over the past three months and 19.42% over the past year.
abrdn Physical Gold Shares ETF (SGOL - Free Report) has gained 14.61% over the past three months and 19.34% over the past year.
Goldman Sachs Physical Gold ETF (AAAU - Free Report) has gained 14.60% over the past three months and 19.30% over the past year.