The price of gold has set a new all-time record at $2,454 per ounce, but it has experienced a correction. However, after the summer, it could approach $3,000 per ounce. Much will depend on inflation in the USA.
After setting the record, the price of gold underwent a significant correction, exceeding $100. While the increase in price since the beginning of the year was 17% at the start of the third decade of May, by the end of May 2024, it had decreased to 11%.
The increase was substantial, though, and it’s worth noting how the price of this metal has fluctuated over the past five years. The minimum was $1,272, and the maximum was the mentioned $2,454 per ounce.
“The rise in gold prices is very strong, especially considering it is a developed market like the gold market,” said Michał Stajniak, an expert at XTB, in an interview with MarketNews24. “This is the result of several factors, particularly the tense situation in the Middle East, leading investors to seek safe havens like gold.”
Gold did not perform well in 2023 due to a very strong dollar and high interest rates in the USA.
Since the fall of 2023, there have been discussions about when the first interest rate cut by the Fed might occur. And since October 2023, the price of gold has already risen by $600.
“When interest rates are high, investors usually turn to assets like bonds, but now we have a situation where, due to the high yields on US 10-year bonds, the price of gold should be below current levels,” explains the XTB expert. “However, this is not the case, due to the search for safe havens and record purchases of gold by central banks in Q1 of this year. The demand for gold is very high.”
The situation is unstable due to interest rates. In April, there were even expectations that the Fed would not cut rates this year, and then the price of gold dropped by $100 per ounce. When inflation in the USA started to decline again, gold prices rose again, as investors bet on the first rate cut happening in September 2024. For the entire year, investors are currently betting on two rate cuts.
Interest rate cuts are therefore crucial for gold to continue increasing in value, breaking further historical records.
“By the end of the summer, we might see a strong upward trend in gold prices if inflation data justify the Fed introducing rate cuts,” assesses M. Stajniak. “The price of gold could be in the wide range of $2,500 – $2,800. It is not excluded that gold could reach $3,000, but this would require greater declines in inflation in the USA.”
What is the profitability of investing in gold for Polish investors, especially since the zloty is very strong and even overvalued? The USD/PLN pair is still close to the 3.90 level, so considering the exchange rate, gold is quite cheap.
However, if the zloty continues to strengthen, the profitability of investing in gold in zloty will be less attractive than investing in gold in dollars.
