Resilient gold bulls drive price to fresh record above USD 2500

Key points

• An almost uninterrupted rally since last October has taken gold to a fresh record, and up +20% year-to-date.
• Demand from family offices, rich individuals, central banks and price momentum keep gold supported
• ETF investors are showing signs of life as the first US rate cut draws nearer 

Gold’s almost uninterrupted rally from a USD 1,810 low last October continues, culminating on Friday when the yellow metal rose above USD 2,500. Having reached our already once revised higher target for 2024, the big question is whether gold has more fuel left in the tank to drive it even higher?

The answer to that, in our opinion, is a yes for various reasons, most of which are unlikely to go away anytime soon. The most important being:

• Geopolitical risks related to Russia/Ukraine, the Middle East and not least uncertainty regarding the November US president election.
• Strong retail demand in China amid the desire to park money in a sector seen as relatively immune to a struggling economy and property woes and the outside risk of the Yuan devaluing.
• Continued central bank demand amid geopolitical uncertainty and de-dollarisation, and not least gold’s ability to offer a level of security and stability that other assets may not provide.
• The US presidential election outcome also a cause for concerns as both candidates are prepared to spend money they haven’t got, thereby lifting the US debt levels further.
• Rising debt-to-GDP ratios among major economies, not least in the US, raising some concerns about the quality of debt. A worry that saw record demand in Q2 from rich individuals and wealthy family offices through the OTC market.
• In addition, we are now increasingly seeing the positive impact of an incoming US rate cutting cycle, a period that historically has seen the yellow metal perform well.
• Rate cuts could see interest rate-sensitive investors return to gold via ETFs, which have seen consistent net selling since 2022 when the FOMC began its aggressive rate-hiking campaign.