Gold rush to endure through 2024 though $3,000 mark may prove elusive

By Brijesh Patel and Ashitha Shivaprasad

SINGAPORE (Reuters) – Gold’s lightning rally to successive record highs shows every sign of continuing in the second half of 2024 as the fundamental case for bullion remains firmly in place, though $3,000 per ounce looks just out of reach, traders and industry experts said.

Investors have flocked in droves towards the precious metal, driven by expectations for monetary easing, geopolitical tension in Europe and the Middle East and – most notably – central bank purchases led by China.

Spot gold is trading around $2,300 per ounce after hitting a record $2,449.89 on May 20, gaining more than 11% so far this year.

“There are lots of reasons driving gold right now…, but one of the major factors is China,” Ruth Crowell, CEO of the London Bullion Market Association, told Reuters on the sidelines of the Asia Pacific Precious Metals conference in Singapore.

“Usually China and Japan have been budget shoppers, but given the state of the economy, real estate challenges and equity markets, gold is a safe choice… I think gold is going to be of interest for some time.”

Central banks across the globe, especially China, have been ramping up reserves held in gold due to currency depreciation and geopolitical and economic risks.

Bullion is traditionally known as a favoured hedge against geopolitical and economic risks, thriving in a low-interest rate environment.

“Physical demand for gold is strong, but we have not seen retail investment demand coming in yet like exchange-traded funds, demand from the United States…I see prices reaching $2,600 – $2,700 very easily this year,” said Amar Singh, Head of Metals – Asia Pacific and Middle East at StoneX.

As investors seek clarity on the timing of interest rate cuts from the Federal Reserve, the November U.S. elections are likely to add more volatility to the market, analysts said.

While most of the analysts and traders remain bullish on gold, the possibility of the precious metal surpassing $3,000 per ounce looks remote at this point, they said.

“It’s not a case of some particular factor holding back gold but rather that $3,000 would mean another 30% from here, which is quite a lot given we have already had some hefty gains,” said Nikos Kavalis, managing director, Metals Focus.

SILVER PERFORMS

Silver, both an investment asset and an industrial metal used in electronics and solar panels, has performed well on the back of gold’s strength and firm physical demand.

The metal was trading at $29.20 per ounce on Tuesday, close to a more than 11-year peak scaled in May.

“The future is bright for silver with respect to its use in green energy transition. Also there is further room for gold prices to go higher and silver prices will follow as well,” said Michael DiRienzo, president & CEO of The Silver Institute.

India’s silver imports in the first four months of the year have already surpassed the total for all of 2023, on rising demand from the solar panel industry and as investors bet on an outperformance versus gold, government and industry officials told Reuters last month.

The silver market is currently in the fourth year of a structural market deficit due to expectations of higher industrial demand, Metals Focus said in research produced for industry body the Silver Institute.

(Reporting by Brijesh Patel and Ashitha Shivaprasad in Bengaluru; editing by Mark Heinrich)