About price forecasts and predictions
A price prediction or ‘forecast’ can be a useful tool to help you navigate the complex and often volatile world of commodity trading and consumption. Although price predictions are speculative by nature and cannot guarantee accuracy, they can help market participants manage price risk, create hedging strategies, and ultimately make more informed decisions about buying or selling assets in financial markets.
Major banks and financial data providers use a combination of historical data analysis, fundamental analysis, technical analysis, and economic indicators to create price forecasts for different asset classes and commodities.
What is gold and what affects its price?
Gold holds the distinction of being one of the world’s most valuable and sought-after precious metals, finding extensive use in jewellery and electronics. Its historical role as a safe haven asset during economic downturns, preserving value for millennia, makes it a reliable investment in uncertain times.
With its long-term intrinsic value, gold effectively diversifies investment portfolios, reducing overall risk. Gold’s price continues to be influenced by a variety of economic and geopolitical factors, including inflation, interest rates, and the value of the US dollar.
Changes in the strength of the US dollar can impact the price of gold since it is priced in US dollars. A weaker US dollar is generally good for the price of gold, as it drives up demand for safe-haven assets. When the dollar strengthens, gold may become more expensive for investors in other currencies, potentially reducing demand. When inflation is expected to rise or exceed nominal interest rates, and the stock market is expected to decline, investors may turn to gold as a store of value, driving up its price.
Central Bank decisions and changes in interest rate monetary policy can also affect the price of gold. For example, declining interest rates can drive up its price.
Governments, investors, and industry experts closely monitor the supply dynamics of gold due to its scarcity, which has been a reason for its value for centuries. Gold is generally not prone to big price swings or high volatility, but it typically keeps growing alongside its utility. This means that forecasting future prices of gold for the next ten years is expected to indicate an increase in value, potentially resulting in profits for those making these predictions. Although it is generally considered a safe investment, this doesn’t mean that there is no risk involved in gold trading and investing. When the stock market is rising, the price of gold can decline.
Since ancient times, gold has been valued for its beauty and rarity. During the 19th century, many countries adopted the gold standard, directly tying their currencies to a specific amount of gold. This period was characterised by relatively stable gold prices and fixed exchange rates between currencies. The period between 1880 and 1914 is known as the classical gold standard when the US experienced a period of unprecedented economic growth with relatively free trade in goods, labour, and capital.
The establishment of the Bretton Woods Accord in 1944 significantly impacted the price of gold. Under the Bretton Woods system, participating countries agreed to peg their currencies to the US dollar, which in turn had gold backing at a fixed rate of $35 per ounce. The US dollar became the world’s primary reserve currency, and other currencies were tied to it at fixed exchange rates.
In 1971, President Richard Nixon decided to end the Bretton Woods system, making a profound impact on the price of gold and the global monetary system. This decision meant that foreign governments and central banks could no longer exchange their US dollars for gold at a fixed rate, leading to significant fluctuations in exchange rates. At that time, the price of gold was $43.15.
In January 1980, the price of gold hit a record of $850 an ounce, reacting not only to high inflation but also to geopolitical tensions with the Iranian Revolution and the Soviet Invasion in Afghanistan. The price of gold reached an all-time high in the 2008 financial crisis of $1,011 an ounce, which was a rise of over 50% in just nine months. This marked a turning point for gold prices.
Gold price forecasts 2024
JPMorgan Chase & Co. foresees an opportunity in gold ahead of a potential US recession that could be caused by a new cycle of rate cuts by the US Federal Reserve. It had predicted that prices would push past $2,000 an ounce by the end of 2023. In December 2023, gold prices hit $2,071, reacting to a new central bank monetary policy and rising haven demand. As interest rates start to fall, prices could hit fresh records in 2024. JP Morgan has an average price target of $2,175 per ounce for bullion in the final quarter of 2024.
Gold’s price forecast for Q1 2024 at Bloomberg Terminal is between $1,913.63-$2,224.22.
Goldman Sachs commodity analysts expect the potential upside of the gold price to be closely tied to changes in US interest rates and dollar movements, leading them to raise the gold price target for 2024 to $2,050 an ounce. Increasing consumer demand from China and India could also affect the price of gold.
Gold price forecasts 2025
Many banks, including Goldman Sachs, Citi, ANZ, and Commerzbank, raised their initial forecasts for gold, as they were faced with the possibility of a banking crisis. Goldman Sachs analysts initially expected the price of gold to remain stable in the period between 2023 and 2026, at around $1,970 an ounce. They hiked their 12-month gold forecasts to $2,050 an ounce.
Gold’s price forecast for 2025 at the Bloomberg Terminal is between $1,709.47 and $2,727.94.
Bloomberg Intelligence Strategist Mike McGlone predicts that both gold and its “digital version,” bitcoin, will appreciate by 2025. The price of gold has shown divergence strength, being up 84% since 2015, when the Fed just started its tightening, and could be heading for $7,000 by 2025.
Gold price forecasts beyond 2025
It is generally believed by commodity analysts that the price of gold will keep rising in the long term. However, it is difficult to accurately forecast the price of gold or the price of any commodity for the next two decades, as the price depends on several different factors. These include the inflation rate, the strength of the US dollar, central bank interest rates, and the increase in the money supply.
Most major banks and financial data providers, such as Bloomberg, provide only short-term price predictions. An additional reason is that commodity markets can be highly volatile, and small changes in supply or demand factors, along with external events like geopolitical tensions or extreme weather events, can lead to unexpected price swings. This volatility can challenge the accuracy of predictions.
Despite the complexity of long-term price predictions, there are different scenarios and long-term price forecasts for gold from 2030-50. Those range from gold reaching $10,000 per ounce, replacing the US dollar alongside Bitcoin, and even the scenario of the world running out of gold by 2050, faced with growing demand.
Gold price forecasts 2030
The $7,000 an-ounce scenario seems to persist in gold forecasts for 2030. In the Rational Case for $7,000 Gold by 2030, economist Charlie Morris predicts the $7,000 price milestone. Morris describes gold as the leading major asset class in the 21st century, which is an extraordinary achievement given that gold doesn’t pay a yield.
Investment analyst Jim Puplava predicts a significant bull market by 2030, citing demographics and globalisation as the primary reasons for the price increase. At the turn of the century, when gold was below $300, Puplava correctly predicted a 10-year bull run in precious metals.
According to the Monetary Climate Change “In Gold We Trust” report for 2023 by investment managers Ronald-Peter Stoeferle and Mark Valek, certain profound changes in fiscal and monetary policy will have tangible consequences for the monetary system and ultimately for the population. High inflation will persist, increasing the need for safe-haven assets like precious metals and cryptocurrencies. Central bank demand will become a key driver of this gold bull market.
Gold price forecasts for 2040
David Harper predicted that the price of gold could reach $6,800 an ounce by 2040, estimating a rate of return of 7.2% per year. This scenario, according to Harper, describes a reasonable return.
Harper’s methodology is based on historical data analysis, calculating that if you bought gold in 1976 at a low of $103 an ounce and held it without interruptions to the peak of almost $1,900 in 2011 (in August and September 2011), you earned a rate of return of 8.5%.
Gold price forecasts until 2050
Commodity analysts who make long-term forecasts believe that the price of gold will generally keep rising in the next few decades as the demand for the precious metal increases.
In a research paper recently published in the journal Trends in Ecology and Evolution, Josep Peñuelas, a research professor at the Center for Ecological Research and Forestry Applications of the Autonomous University of Barcelona and at the Higher Council for Scientific Research (CREAF-CSIC), warned that by 2050, the world could run out of essential metals, including gold.
Other theories about the future of precious metals, however, are more optimistic. Gold has been here since eternity, according to Robert Kiyosaki, and being “God’s money,” it is likely to become the main form of currency in the future. In his book “Fake,” Kiyosaki examines the future of money and claims that ultimately gold alongside bitcoin could erode fiat currencies.