Record High Gold Prices... "Will Rise Further This Year"

Surpassing $2,110 per Ounce
Expectations for US Interest Rate Cuts Within the Year
Uncertainties from US Presidential Election and War
Forecast of $2,300 per Ounce

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The representative "safe asset," gold, has reached an all-time high. This is the result of expectations for an interest rate cut by the U.S. Federal Reserve (Fed) within the year, combined with global economic and political uncertainties. Many anticipate that the price could rise further.

On the 4th (local time), the spot price of gold traded on the New York Mercantile Exchange rose 1.48% from the previous trading day to $2,114.35 per ounce, surpassing the previous high of $2,077.49 set on December 27 last year for the first time in over two months. Gold prices have increased by 2.7% since the beginning of this year.

Experts noted that this gold price rally occurred amid high interest rates and a strong dollar. Typically, when the dollar is strong, the attractiveness of investing in gold decreases due to the high risk of losses from exchange rate fluctuations upon repatriation. Also, when high interest rates persist, investors who need liquidity have less capacity to hold gold.

It is analyzed that gold investors have preemptively purchased gold amid a near certainty of an interest rate cut within the year. Bloomberg reported, "After analyzing U.S. economic data (such as inflation), gold investors appear to be betting on the Fed cutting the benchmark interest rate in June." The recently released U.S. January Personal Consumption Expenditures (PCE) core price index rose 2.4% year-on-year, showing a slowdown compared to 2.6% in December last year. The PCE price index is the Fed's most closely watched indicator when deciding interest rates, and with it approaching the Fed's 2% target, the market judged that the Fed no longer has grounds to maintain high interest rates.

In particular, the presence of uncertain variables worldwide this year has also contributed to driving up gold prices. The upcoming U.S. presidential election in November and ongoing wars in Ukraine and the Gaza Strip are representative examples. There is also escalating tension between Russia and the West. Adrian Ash, head of research at BullionVault, added, "As Russia and the North Atlantic Treaty Organization (NATO) publicly discuss the risk of direct conflict, gold buying by bond portfolio managers has fueled the rally."

Gold prices are expected to continue their upward trend for some time. Since the regional banking crisis triggered by the Silicon Valley Bank (SVB) collapse in March last year has recently resurfaced, attention to safe assets is increasing. Additionally, with major oil-producing countries extending production cuts, oil prices have risen, leading to expectations that some investment funds will continue to flow into commodities.

TD Securities pointed out that, based on historical standards at the start of interest rate cuts, investors are still underinvested in gold. Ryan McKay, TD Securities' chief commodities strategist, predicted, "Once the Fed begins cutting rates, gold prices will rise above $2,300 per ounce."