Gold prices surged to record highs earlier this week before consolidating around the $2,150 per ounce mark. Analysts at ANZ Group have offered insights into the future trajectory of the precious metal, suggesting a potential short-term pullback but ultimately raising their year-end target for gold.
Spot prices reached nearly $2,200 per ounce at the beginning of the week, driven by expectations that the Federal Reserve would begin cutting interest rates by June. However, stronger-than-expected consumer price index data for February challenged this narrative, with continued resilience in inflation potentially deterring early rate cuts by the Fed.
According to ANZ analysts, the recent gold rally has surpassed macroeconomic and geopolitical developments. They anticipate a near-term pullback in gold prices to around $2,100 per ounce.
Nevertheless, ANZ remains optimistic about gold’s outlook for the remainder of the year. They expect U.S. inflation to ease in the coming months, moving closer to the Fed’s 2% annual target and setting the stage for rate cuts in the second half of the year, particularly in July. As a result, ANZ has upgraded its year-end price target for gold to $2,300 per ounce, indicating a potential upside of nearly 6% from current levels.
The analysts also view the price pullback as an opportunity to build long positions, emphasizing that the recent rally has bolstered their baseline outlook for gold.
Furthermore, ANZ highlights investment demand as a crucial factor driving gold in the second half of 2024. They anticipate a reversal of outflows from market-traded gold investment products, as central banks transition from monetary tightening to easing. This shift could unlock significant upside potential for gold holdings, as less crowded investment positions emerge.
While physical demand for gold has been supported by surprising strength in China and India, ANZ analysts expect growth in this area to taper off. Slowing consumer spending in China and, to a lesser extent, India, could dampen physical demand for gold in the coming months.