Analysts list factors keeping gold bullish @ $2700/oz near-term target

• Global trend  continuing after climbing $2,490/oz
• Record prices hold implication for global FX trade
• Demand for safe-haven assets grows 

PHILLIP ISAKPA IN LONDON, UK 

A bullish trend in the global commodities market for gold, which has seen international prices of the precious metal reaching a new all-time high surpassing $2490 per ounce (oz), is set to continue, with a medium-term target of $2700 per ounce (oz) projected by analysts at Melbourne, Australia headquartered trader, Pepperstone.

A combination of factors, including expectation of an interest rate cut and a slowdown of the economy in the United States; physical purchases of gold by some countries; and global geopolitical tension, are providing firepower for gold’s bullish trend, say Pepperstone analysts.

In a Pepperstone market analysis written by Quasar Elizundia, its research strategy expert, and made available to Business a.m., it highlighted the historic record international prices for gold and its implications for the global forex trade, noting this has been driven by growing demand for safe-haven assets.  

“Gold has reached a new all-time high, surpassing $2,490 per ounce, amid growing demand for safe-haven assets in an increasingly uncertain global environment. This new peak occurred after weeks of consolidation around $2,480 per ounce, a level that had limited the precious metal’s gains,” the Pepperstone analysis stated.

It noted further that the recent movement in gold underscores the importance investors place on it as a safe asset, “especially in times when economic and political outlooks are highly volatile.”

Elizundia stuck out his neck to project a bullish outlook for gold and suggested a medium-term target of $2,700 per ounce, noting that there are several key factors that support this forecast.

With markets anticipating cuts in interest rates by the United States Federal Reserve, gold has become more attractive when compared to other safe-haven assets that generate yields, the Pepperstone analysis asserted. 

“One of the main factors supporting gold’s bullish trend is the expectation of interest rate cuts by the U.S. Federal Reserve,” Elizundia wrote. He added that “if these cuts materialise, we could see an acceleration in gold demand, further boosting its price”.

The fear of the exacerbation of the economic slowdown, already noticeable in certain areas of the US economy, is also helping to lift gold prices in the international market, the analyst asserted.  

According to the Pepperstone analysis, “While some interest rate cuts are already priced in by the markets, the possibility that these cuts may be less than expected could exacerbate the economic slowdown already manifesting in certain areas of the economy.”

Specifically, it stated that recent data on the U.S. housing sector, where housing starts and building permits have fallen to four-year lows, “suggest that restrictive monetary policy is having a significant impact. A deeper economic deterioration could increase demand for gold as a safe haven.”

Gold’s current bullish trend is also continuing to receive support from the physical purchase of reserves by countries, such as China.

According to the analysis, “These acquisitions are driven by the need to diversify reserves and avoid vulnerability to international sanctions, such as those imposed on Russia following its invasion of Ukraine.

“Although China has not added to its reserves in the past three months, the value of these reserves has increased significantly due to the appreciation in gold prices, reflecting the growing importance of the metal in the current geopolitical context,” wrote Pepperstone’s Eluzindia.

Gold’s bullish trend, as reflected in its current international market prices, is also indicative of its reaction to global geopolitical tension, according to the analysis by Pepperstone.

“Ongoing geopolitical conflicts, such as the standoff between Russia and Ukraine and rising tensions in the Middle East, continue to pose a significant risk to global stability. Any escalation in these regions could trigger greater demand for safe-haven assets, including gold, further reinforcing its bullish profile,” Pepperstone noted.

In the context of geopolitical instability, gold has proven to be an essential store of value in times of uncertainty, the analysts observed, adding that despite the pause in reserve accumulation by some central banks, such as China’s, the precious metal continues to gain ground, driven by its ability to protect value in a high-risk environment.

The analysis by Pepperstone, the Australian online broker which provides CFD trading and has offices in Melbourne, London, Düsseldorf, Dubai, Limassol, Nassau and Nairobi, further noted that gold has not only reached a new record but has also reaffirmed its position as a key asset in financial risk management. 

“As the economic and geopolitical landscape continues to evolve, it is likely that the precious metal will continue to play a central role in global investment strategies,” it stated.

Providing what he called a ‘technical analysis of gold prices’, the author of the Pepperstone analysis, observed that gold has surpassed key resistance levels, thus opening the door to potential significant gains.

“The precious metal, in a sustained bullish trend, shows a positive outlook both in the short and long term,” Elizundia stated.

On the long-term perspective for gold, he wrote:

“Since the early 2000s, gold has experienced a remarkable rise, reaching its highest point in the previous bullish cycle in 2011. The 61.8% Fibonacci expansion level of this previous advance, around $2,076, had been a persistent obstacle that gold had been unable to overcome until 2024. The recent breakout of this level suggests that the bull market could have more room to run. The next relevant target, according to Fibonacci extensions, is at $2,709.81, which would mark a new all-time high. The strength of this breakout indicates that this level is attainable in the future.”

On the short-term perspective for gold, he wrote: 

“In the short term, gold continues its bullish structure, forming a series of higher highs and higher lows. Key support levels are found at $2,299 and $2,206, corresponding to the 23.6% and 38.2% Fibonacci retracements. These could serve as entry points if a correction occurs. The recent pursuit of the psychological $2,500 level reinforces the bullish outlook. The $2,700 level is the next critical target to watch.”

Accordingly, Elizundia, the Pepperstone research strategist, stated that the recent behaviour of the precious metal, reinforces the bullish narrative, adding that “in an environment of macroeconomic uncertainty and high demand for safe-haven assets, the outlook for gold remains very positive, solidifying its position as a key asset in global financial markets.”