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Central Bank Purchases and Geopolitical Tensions Drive Gold Prices

Quiver Editor

Gold's (GLD) remarkable rally to successive record highs is expected to continue in the second half of 2024, driven by robust fundamentals such as monetary easing, geopolitical tensions, and significant central bank purchases, particularly by China. Despite these bullish factors, industry experts believe the precious metal is unlikely to reach the $3,000 per ounce mark. Spot gold is currently trading around $2,300 per ounce, having hit a record $2,449.89 in May, marking an 11% gain so far this year.

According to Ruth Crowell, CEO of the London Bullion Market Association, China's substantial demand for gold, driven by economic challenges and geopolitical risks, is a key factor supporting the metal's price. Central banks worldwide are increasing their gold reserves due to currency depreciation and economic uncertainties, reinforcing gold's role as a hedge. While physical demand remains strong, retail investment, particularly from the U.S., has yet to catch up, though analysts see prices reaching $2,600 - $2,700 per ounce by year's end.

Market Overview:
  • Gold prices have surged, with spot gold trading around $2,300 per ounce.
  • China's demand and central bank purchases are significant drivers.
  • Retail investment demand, especially from the U.S., is expected to increase.
Key Points:
  • Gold hit a record $2,449.89 per ounce in May, gaining 11% this year.
  • Monetary easing and geopolitical tensions support gold prices.
  • Analysts predict prices could reach $2,600 - $2,700 per ounce this year.
Looking Ahead:
  • Continued central bank purchases and geopolitical risks to support gold.
  • Retail investment demand from the U.S. could further boost prices.
  • Despite bullish trends, $3,000 per ounce remains an unlikely target.

Silver (SLV) has also performed well, benefiting from gold's strength and robust physical demand, particularly in electronics and solar panels. Trading at $29.20 per ounce, silver is close to an 11-year peak reached in May. The metal's future looks promising due to its use in green energy and potential for further price increases in tandem with gold. India's silver imports have surged, driven by demand from the solar panel industry and expectations of outperformance against gold. The silver market is in its fourth year of a structural deficit, indicating sustained high demand.

The bullish trends in gold and silver markets reflect the broader economic and geopolitical uncertainties that continue to drive investor interest in precious metals. As central banks and institutional investors maintain their focus on these assets, the outlook for both metals remains positive, even as the prospect of reaching the $3,000 mark for gold remains distant. The ongoing demand from industries and investment sectors is set to sustain the upward trajectory of these valuable commodities.

About the Author

David Love is an editor at Quiver Quantitative, with a focus on global markets and breaking news. Prior to joining Quiver, David was the CEO of Winter Haven Capital.

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