Analysts See Gold Prices at $3,000 by Next Year

Over the past three months, gold futures have risen by 5%, investors are seeking safe-haven assets, amid concerns about the global economy.

central banks are on course to loosen monetary policies due to softening consumer prices and slowing economic growth. Gold prices are inversely correlated with the value of the US dollar and interest rates.

First, as gold is priced in US dollars, a weaker dollar makes gold less expensive in other currencies, thereby increasing demand for the precious metal. Secondly, lower interest rates make interest-bearing assets, such as cash, less attractive, while gold becomes more appealing as a store of value.

The catalyst for the surge in gold prices may have been the disappointing US property market data released on Friday, which showed that housing starts slumped 6.8% to a four-year low and housing permits fell for the sixth consecutive month in July.

The disappointing data has further reinforced the likelihood of the Federal Reserve commencing rate cuts in September and beyond.

Last week, both the UK and the US released cooler-than-expected inflation data for July, encouraging signs of a lower interest rate environment in these major economies.

Furthermore, safe-haven demand has also bolstered gold prices amidst ongoing military conflicts in the Middle East and the war between Ukraine and Russia.

Gold investor sentiment looks set for the upside in the three to six months window, Citi analysts said in note on Monday.

The bank added that they see a $3,000 per ounce target by the middle of 2025, and a fourth quarter average price forecast of $2,550 per ounce.

Traders will also be watching out for the annual economic policy symposium in Jackson Hole this week, which could offer greater clarity on the interest rate outlook, with Fed Chair Jerome Powell set to speak at the gathering.