How long can the price of gold rise?
Gold prices have been soaring lately, hitting record highs. In the 14 trading days to April 12, U.S. gold futures closed higher in 11 trading days, at one point standing above $2,400 an ounce. Analysts believe that the recent rebound in U.S. inflation, geopolitics and other factors support the rise in gold prices. However, as gold has been extremely overbought, gold prices may correct in the near future, and gold prices still have room to rise in the medium to long term.
In response to high inflation, the US Federal Reserve has raised interest rates since March 2022, and the target range for the federal funds rate remains high at 5.25% to 5.5%, but US inflation is still far from the 2% target. According to the latest data from the U.S. Department of Labor, the consumer price index (CPI) rose 3.5% year-on-year in March, an increase of 0.3 percentage points from February. Persistently high inflation has boosted investor demand for gold, a safe-haven asset, helping gold prices to rise.
In terms of geopolitical factors, Iran launched a retaliatory strike against Israel on the evening of the 13th local time. This has been reflected in the recent gold price movement as the market has priced in anticipation of Iran's retaliation against Israel. The subsequent impact of the conflict between the two countries on gold prices will depend on whether tensions escalate further.
At the same time, there are many factors that have suppressed gold prices recently, including the US dollar index, US Treasury yields continue to hit new highs, and the timing of interest rate cuts by European and US central banks is not yet clear. Many institutions believe that gold prices are still rising sharply despite the rise in the dollar index and US Treasury yields, which indicates that the market's trust in the US dollar as the main reserve currency and US Treasuries as safe assets is gradually decreasing.
According to the latest statistics from the U.S. Treasury Department, as of April 8, the total U.S. federal government debt has reached $34.6 trillion, and the size of the debt is still expanding at a rate of $1 trillion every 100 days.
Economists have sounded the alarm of the US debt crisis, calling for "debt detoxification". Many central banks around the world sell U.S. bonds to buy gold. According to the World Gold Council, global central banks have seen annual net purchases of more than 1,000t in both 2022 and 2023.
Analysts believe that gold prices still have upside potential as there are no signs that the pace of gold purchases by the world's major central banks will slow down. Some institutions even predict that the "gold rush" in 2024 has just begun, and the heat may last for 2 to 3 years, and the gold price is still in a cyclical upward channel.
Source: Xinhua News Agency
