The gold market has had its best quarter in 39 years. But according to available analyses, the precious metal's upward journey may not be over yet - on the contrary. There are scenarios in play that could take the gold price to as high as US$4,500 per ounce over the next year.
Gold started this year by breaking several price records. The last time gold prices rose more than 18% in three months was in 1986. Back in March, gold surpassed the psychological level of three thousand dollars per ounce. Then, on April 22, the gold price soared to $3,500 - an all-time high. Analysts of the major commercial banks are now racing ahead with their forecasts and estimating what base the gold price will reach in the near future. "Banks like Goldman Sachs and Bank of America are changing their rhetoric - previously cautious outlooks are becoming bullish predictions. For example, Bank of America raised its forecast for gold for the next two years in April, estimating the price would reach $3,500 per troy ounce. Given current developments, this outlook seems somewhat tame. But it is not alone in raising its expectations. Goldman Sachs bank is factoring in an extreme scenario in its estimates, where it sees the potential to reach $4,500 by April next year," He pointed out Roman Pilíšek, economist and co-founder of the company Golden Reserves, which has been operating on the Czech market since 2010.
The first half of April saw significant changes in the gold market. Among the most significant is the new policy in China that allows massive gold purchases by insurance companies. "Chinese insurance companies have been newly allowed by the government to invest up to a percentage of their assets in gold. The move is estimated to create an annual additional demand for gold of around 255 tonnes. This is equivalent to about a quarter of global central bank purchases. If Chinese insurers start buying gold in bulk, they will become a key player capable of capturing any short-term downturn and supporting the long-term growth trend," described Roman Pilíšek.
America is back in the game. "Analysis shows that the global flow of gold is heading back to the United States. Since the beginning of the year, more than 830 tonnes have flowed into the COMEX, which is comparable only to the pandemic period. COMEX exchanges have also seen record gold shipments - for example, 7.5 million ounces in February and another six million in April. Physical demand from investors through funds is also growing, with new purchases of 93 tonnes in February alone, more than in the whole of the first half of last year." said Roman Pilíšek.
Can the price of gold fall? "Despite the extremely bullish outlook, there are warning signs. Investor sentiment is borderline euphoric. Most investors currently believe strongly that gold will only go up. This optimism is measured by various indices that track what investors think or how they behave. For example, towards the end of April, the 6-month sentiment index signalled an extreme overheating of the gold market, which usually heralds a price correction. Past experience shows that overheated phases can culminate in a 'overshoot' in price that could range from $3,600 to $3,800. This is usually followed by a sharp correction back to $3,200 to $3,000 per ounce," explained Roman Pilíšek.
This year, gold is undergoing a fundamental transformation unprecedented in its history. "Big investors are hugely interested in the precious metal, the world is full of uncertainty and central banks are changing their approach to diversifying reserves. All of this adds up to a powerful mix that can significantly influence where the gold price goes. Whether gold shoots to record highs, stays steady, or falls a bit, one thing is certain - gold is back in the spotlight - and stronger than ever," concluded Roman Pilíšek.
pearmedia/ gnews.cz - RoZ
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