- Gold hit an all-time high in September but has since fallen back
- Analysts expect supportive environment to continue with added Fed boost
Analysts have backed gold prices to maintain momentum in the months ahead to reach fresh all-time highs as central banks continue to cut interest rates.
Gold hit a record $2,685.49/oz in September as geopolitical conflict and trade fears continued to drive investors into so-called ‘safe haven’ assets, while globally central banks – most notably China – have added to demand by substantially bolstering reserves.
At $2,617 as of Thursday morning, the price of gold has fallen back but is still up almost 27 per cent since kicking off 2024 at $2,062.
Analysts at UBS forecast gold to hit a record high of $2,850/oz by mid-2025
Chief investment officer for global wealth management at UBS Mark Haefele said the bank continues to see ‘fundamental factors that should guide… gold higher in the coming months’, highlighting Federal Reserve rate cuts as a crucial driver.
Minutes from a meeting of Fed rate-setters published this week bolstered expectations that the pace of rate cuts will not be as aggressive as initially expected, despite a bumper 50 basis point reduction last month.
Markets currently forecast a roughly 80 per cent chance the Fed will cut by another 25bps at its 9 November meeting, while a majority see another 25bps cut in December.
Political conflict and trade fears have driven investors into so-called ‘safe haven’ assets like gold
This would take the Fed’s rate range from its current level of 4.75 to 5 per cent to 4.25 to 4.5 per cent by year-end.
Haefele said: ‘While markets have recently scaled back expectations on the pace of the Federal Reserve’s easing, the central bank has nonetheless kicked off its rate-cutting cycle with more cuts to come.
‘Gold has historically rallied by as much as 10 per cent in the six months after the first Fed rate cut, and ETF demand is gathering momentum.’
He added that demand from Chinese investors ‘remains solid’, while jewellery consumption growth, continued central bank purchases and uncertainty over the US election should also prove supportive.
UBS forecasts gold to hit $2,850/oz by ‘mid-2025’, which would reflect growth of around 8.9 per cent from current pricing.
Chief global market strategist at Invesco Kristina Hooper expects geopolitical tensions to be the key driver of gold price gains in the months ahead.
She said: ‘Gold seems to have replaced US Treasuries as the ‘safe haven’ asset class of choice for many investors.
‘I expect this trend to continue, given uncertainty around the US election and rising tensions in the Middle East.
‘Gold could also prove more attractive to some investors because the opportunity cost of owning gold decreases as rates come down.’
Gold has bee the best performing asset class this year
Join the gold rush – or buy the picks and shovels?
Retail investors often buy exposure to gold via exchange-traded funds (ETFs), which are relatively inexpensive and offer good liquidity in an illiquid market.
However, head of investment companies research at Kepler Thomas McMahon suggests investors should consider an alternative entry point.
He says: ‘While an ETF is the obvious solution for an investor looking for exposure to the gold price itself, it is also worth considering the mining sector.
The managers of Ruffer Investment Company have sold their gold to buy the miners, arguing the cheap valuations mean there is more upside and less downside.
‘Golden Prospect Precious Metals remains the only option for pure-play exposure to the miners, and has soared by over 30 per cent year-to-date in NAV terms.
‘BlackRock World Mining does have significant gold mining exposure, although it remains focused on industrial commodities, which have more economic sensitivity, in particular to the Chinese economy.’
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