Gold is not losing its allure, according to a dozen money managers who all told Bloomberg News they expect to maintain or raise their exposure to the precious metal in the coming twelve months. The survey of investors — from sovereign wealth managers to hedge funds — offered some modest optimism for price prospects into 2024. None of the respondents said they would cut their exposure to gold in the immediate 12 months, and five of them said they expected to boost their allocations. More than two thirds of them see prices rising, and five expect a clear all-time high. The poll was conducted between Aug. 10 and Aug. 22.
The continued appetite for gold points to lingering worries about geopolitical tensions and macroeconomic uncertainties — for example, simmering tensions between the US and China, war in Ukraine, or what’s next for China’s property crisis. Other positive factors for gold include continued purchases by global central banks and relatively strong retail demand in emerging markets.
Fed Tightening Cycle Nears End
One of the main challenges for gold has been the Federal Reserve’s aggressive monetary tightening, which has pushed up real yields and strengthened the US dollar. The Fed has raised interest rates four times since December 2022, and signaled two more hikes this year. Higher interest rates make gold less attractive as it does not pay any interest or dividends.
However, there is still uncertainty around when the Fed will end its tightening cycle, which would be an important positive for non-interest bearing gold. While some investors are bracing for rates to stay higher for longer, the swaps market is still pricing in no more rate hikes, and a shift to policy easing next year.
“We do anticipate there’s pent-up gold demand from investors waiting for the Fed to finish,” said Darwei Kung, head of commodities and portfolio manager at DWS Group. “That’s a positive set-up from our perspective.” He sees gold reaching a record $2,250 an ounce in the time period.
Gold Price Outlook
Bullion is currently trading near $1,900 an ounce, down about 8% from this year’s peak. It reached a record in August 2020 at about $2,075, in the midst of global economic turmoil triggered by the Covid-19 pandemic.
A separate survey also showed expectations for higher gold prices. Gold will trade at $2,021 per ounce 12 months from now, according to the median of 602 responses to Bloomberg’s Markets Live Pulse online survey of global readers conducted from Aug. 14 to 18.
Some analysts are also bullish on gold, citing inflationary pressures, supply constraints, and diversification benefits. Goldman Sachs Group Inc. expects gold to climb to $2,300 an ounce by the end of 2024, while Bank of America Corp. sees it reaching $2,500 an ounce in the same period.
However, not everyone is convinced that gold will shine in the near future. Some investors may prefer other assets that offer higher returns or more protection against inflation, such as cryptocurrencies, equities, or commodities. Moreover, some of the risks that have supported gold demand may ease or fade away, such as the pandemic, trade wars, or geopolitical conflicts.
