Gold has climbed to a record high for the second session in a row, as investors flock to the traditional safe haven asset amid hopes of interest rate cuts in the months ahead.
The price of gold has reached $2,111.39 per ounce, exceeding the records set on Friday night and the previous one of August 2020.
Gold has strengthened amid hopes that the cycle of interest rate increases over the last couple of years has now ended and that central banks will turn their attention to cutting borrowing costs in 2024.
This has led to a weaker U.S. dollar, which pushes up the gold price (as it is priced in dollars).
Gold has climbed since the start of October before record high
Gold has climbed pretty steadily since the start of October, when it was being exchanged at $1,820 per ounce.
“The anticipated retreat in both the USD and interest rates across 2024 are key positive drivers for gold,” UOB’s Head of Markets Strategy, Global Economics and Markets Research, Heng Koon How, told CNBC. He estimated that gold prices could reach up to $2,200 by the end of 2024.
Gold’s gains are the latest leg in a powerful rally that began in November of last year, driven by rampant central bank purchasing and investor concerns over the conflicts in Ukraine, Israel, and Gaza, the Financial Times (FT) reports.
Gold reached its previous record high of $2,072.49 per troy ounce in August 2020, when the coronavirus pandemic was hitting the US economy, leading investors to snap up the precious metal. The price also momentarily broke through that level on Friday, reaching a high of $2,075.09 per troy ounce, FT says.
Ross Norman, chief executive of Metals Daily, told the paper the latest rise was likely to be largely speculative flows from future traders during a time of thin market conditions.
“Traders are swimming with the tide—you have a falling dollar here, a strong seasonal period when bulls can take on the market without compunction, and geopolitical tensions,” he said.
According to a recent survey by the World Gold Council, 24 percent of all central banks intend to increase their gold reserves in the next twelve months, as they increasingly grow pessimistic about the U.S. dollar as a reserve asset.
“This means potentially higher demand from the official sector in the years to come,” Bart Melek, head of commodity strategies at TD Securities told CNBC.
Crypto assets are also on a charge, with bitcoin hitting forty thousand dollars for the first time this year today, with some traders betting the US Federal Reserve could start cutting US interest rates next spring.
The advance drove crypto stocks higher, too. Crypto exchange Coinbase (COIN) jumped almost nine percent in pre-market trading, as did Microstrategy (MSTR). Crypto miners, such as Marathon Digital (MARA) and Riot (RIOT), added more than ten percent.
Related: John Koudounis on Interest Rates, Inflation, Recession Fears, Crypto and AI
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