Gold prices are currently hovering around $2,020, after reaching an all-time high on August 6 of $2,075. The precious metal experienced a rapid upward movement in the past few months, driven by both technical factors and macro events such as the COVID-19 pandemic, easing monetary policies implemented by central banks, and escalating tensions between the US and China. Given the potentially long-lasting impact of these factors, as well as the consistent patterns observed in the gold market, experts predict that prices could continue to rise and even approach or surpass the $2,100 mark.
A key indicator supporting this assumption is the recent consolidation of gold prices around $2,020. This stabilization after a sharp rise in prices is seen as a healthy development for the market, as it limits the risk of a sudden price collapse. Additionally, technical analysis of the gold chart reveals that the current upward trend is sustained, and the price range could continue to move within $1,900 to $2,100.
Notably, gold prices have faced resistance at the $2,062 level. If they manage to break through this barrier, it could trigger fresh buying, pushing prices higher and potentially into uncharted territory beyond $2,100. Several market factors could contribute to this outcome. For instance, central banks worldwide are taking scaled-back approaches to interest rate hikes, given the influx of liquidity entering the market as a result of their pandemic-related policies. Stagnant or low interest rates typically make gold more attractive as an investment, due to reduced yields on so-called risk-free assets, such as bonds.
On the flip side, it’s crucial to consider potential downside risks as well. If there’s any disappointing news on the interest rate front, or if large market actors begin to exit their positions, gold prices could retreat back to the $1,900 support level. However, considering the ongoing global economic and political climate, chances of a reversal appear slim at this point. Although COVID-19 vaccines and treatments are in development, the long-term impact of the pandemic is still uncertain. Similarly, tensions between the US and China, particularly around technology and trade, continue to escalate, stoking fears of further instability in the global economy.
One important factor that could play a role is the upcoming US presidential election. With the voting scheduled for November, market participants will be closely monitoring the potential shifts in US policies in response to the outcome. Depending on the results, gold prices, as well as other asset classes, may experience significant movements.
Another factor boosting the gold market is increasing demand from investors for gold-backed exchange-traded funds (ETFs). Gold ETFs allow investors to gain exposure to the precious metal without having to physically hold the gold. The popularity of these investment products has surged since the start of the COVID-19 crisis, with holdings reaching a record 3,510 metric tons in July.
Despite the rising prices, some analysts still consider gold to be undervalued from a historical perspective. Since 1971, when the gold price was first allowed to freely float, the average annual price for gold has been around $600 per ounce, adjusted for inflation. Considering the current global economic and political landscape, the “fair value” of gold could arguably be higher than historical averages. Furthermore, with reports of only limited gold reserves remaining in mines around the world, scarcity could become a significant factor driving prices even higher.
In conclusion, the gold market is currently displaying sustained upward momentum. Given the recent consolidation around $2,020 and the prevailing global macroeconomic conditions, the likelihood of gold prices advancing toward $2,100 — or even beyond — is growing. It remains crucial for market participants to monitor unfolding events and assess their potential impact on the market, keeping in mind the downside risks as well as the ongoing bullish trend.