Gold Prices Soar: Will The Record Highs Last?

Gold is one of the most traded financial instruments in the world. Therefore, it is no wonder that gold’s record prices are a hot conversation topic among financial analysts on financial news outlets, trying to forecast the trajectory of the precious metal’s value.

In this article, we will share valuable insights regarding gold trading as well as forecasts regarding gold prices coming from analysts working in renowned financial institutions across the world.

World Gold Council Reports Record Gold Demand In Q3 2024

A World Gold Council report that global demand for the commodity reached a record high value of over $100 billion. In the report it is noted that total gold demand increased by 5% on an annualised basis to 1,313 tons, which is a record for a third quarter. The gold’s demand rise was attributed to both exchange-traded fund (ETF) and over-the-counter (OTC) investment flows.

Speaking to the “The Money Show” and Stephen Grootes on October 31st, Krishan Gopaul, the World Gold Council's senior analyst for Europe, Middle East, and Africa (EMEA) said the following: "I think the drivers behind a lot of that interest is just the geopolitical and economic environment we're in. There's a heightened degree of uncertainty at the moment; next week we have the US election and that's a pivotal moment for what it may mean. The uncertainty affecting investors is something that holds true for central banks as well. Gold's role traditionally as a kind of inflation hedge or a store of value, its performance in times of crisis and ability to act as a diversifier - they're all really important reasons why central banks hold gold."

What Do Analysts Forecast About Gold Prices?

Rising gold prices have made market analysts collect data in order to forecast their trajectory in the next few months. Gold is up by almost 33% year-to-date and by 37.5% on an annualised basis at the time of writing. 

Bank forecasts shared by banks earlier in the year failed to predict the scale of the gold price surge in the third quarter. Let’s now look at updated bank forecasts for the coming months as new data becomes available.

HSBC Sees Gold Rally Moderating In 2025

HSBC market analysts suggest that gold prices could rise even further next year but they also forecast that prices could be moderated towards the end of 2025. In their note, they write: “The rally is likely to moderate later in 2025, in our precious metals analysts’ view. Nevertheless, a combination of physical and financial market factors may tame the rally, as we move through 2025, with gold prices likely to be moderately lower by end-2025. In the physical market, high gold prices are driving outright declines in gold jewellery purchases, alongside lower gold coins and bar demand.”

Economists at the UK bank also noted that gold prices are likely to remain above $2,200 per ounce mark supported by geopolitical risks and economic uncertainty across the world. Commenting on the precious metal price trajectory, they added that “at the same time, global gold output is on an upward trajectory at least for this and next year, with mining being the biggest single source of new supply to the market. High gold prices are also stimulating scrap supply of gold. In other words, gold may face headwinds from weaker demand for jewellery and bar & coins and rising mine supply and recycling levels. Gold exchange-traded funds (ETFs) continue to liquidate holdings, and central bank demand may also moderate in the face of high prices.”

Commerzbank: Gold Prices Boosted By ETF Demand

Economists working at Commerzbank said in a report published on November 1st that gold prices likely rose due to an increase in demand in gold-based ETFs. In their note to investors, they write: “ETFs should see further inflows due to the expected interest rate cuts, high fiscal deficits and the highly valued stock markets. Excluding the less transparent OTC transactions, demand for Gold in the first three quarters was 3% below the previous year's level. Only the Gold ETFs provided positive impetus for demand.”

Goldman Sachs Says Gold Could Hit $3,000 Mark In 2025

Goldman Sachs (GS) economists note that central banks in developing economies tend to retain large quantities of gold with emerging economies following their example, making a special mention to China: “China, for example, reports to have 5% of its reserves in the metal. Seen that way, some central banks in emerging markets are catching up to their counterparts in developed countries.”

GS analysts said that “as an asset that doesn’t offer any yield, it typically becomes less attractive to investors when interest rates are higher, and it’s usually more desirable when rates fall.” They also estimated that 100 tons of physical demand could increase gold prices by at least 2.4%. Their report also notes that the freezing of Russian central bank assets in 2022 has played an important role in emerging market central bank purchases of gold.

The report suggests that “the precious metal is predicted to rise to $3,000 per troy ounce by end-2025.”

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.