Gold to surge through $2,000/oz as US rates outlook provides lift

Molten gold pour.

GOLD is tipped to surge through $2,000 per ounce as macroeconomic headwinds that kept the metal in check last year are expected to ease.

The macroeconomic backdrop is becoming “increasingly bullish for gold,” said Bank of America in a report on January 23. The bank said gold’s “diversifier” role in a portfolio was coming to the fore even though it wasn’t among the metals favoured in the globe’s push towards decarbonisation.

Investors “can benefit benefit from gold’s near-term price appreciation and from its long-term strategic portfolio diversification,” the bank’s analysts said. They forecast the metal “pushing above $2,000/oz in the coming months on tailwinds from US rates”.

Gold is currently trading at $1,930/oz, 4.8% higher than a year ago but not its highest price in the last 12 months which was in March when it was $2,050/oz.

In 2022, gold faced dual macro headwinds of rising rates and a strengthening US dollar, said Morgan Stanley on January 16.” This weighed on pricing, although inflation fears and geopolitical uncertainty provided some offset.

“However, with our economists now calling for lower rates and a weaker USD, macro headwinds are becoming tailwinds,” the bank said.

Credit Suisse, which forecast declining gold prices this year, said that “with continued uncertainty” the pace of “price rationalisation” in gold will be slower. Gold prices could be 4.5% and 3.1% higher than its forecast of $1,725 and $1,650/oz in 2023 and 2024 respectively, it said.

In rand terms, the gold price is just through R1.07m per kilogram, a gain of about 18% during the last year and its highest level since 2020 when it notched up R1.15m/kg as the world reeled from the impact of Covid-19 infections.

It has sent Johannesburg gold stocks soaring. Shares in Harmony Gold, which derives almost all of its 1.1 million ounces in annual gold production from South Africa, have more than doubled since September.

Shares in DRDGOLD, which retreats gold from slimes, are about 13% higher in the past 12 months. The share, at about R14.46 a piece is just off its 12 month high of R16.19/share in  March last year.

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