(News Bulletin 247) – The precious metal is benefiting in particular from expectations of a drop in key rates by the American Federal Reserve.

Gold is pushing its records a little further. The precious metal reached a new all-time high on Tuesday, at $2,457.81 per ounce in the late afternoon, surpassing the $2,450 or so set at the end of May.

The “barbaric relic”, as the illustrious economist John Maynard Keynes nicknamed it, has recorded a gain of 18% since the beginning of the year.

The precious metal is benefiting in particular from expectations of rate cuts by the US Federal Reserve (Fed). Last week, US inflation came in slightly lower than expected for June, fuelling market speculation about rate cuts by the US central bank. This helped trigger an upward movement in gold and push the ounce back to over $2,400.

>> Access our exclusive graphic analyses, and enter the confidence of the Trading Portfolio

Attractive to Chinese households

In theory, the performance of gold is negatively correlated with that of interest rates. The higher the interest rates, the less attractive gold theoretically is, all other things being equal. Unlike stocks (with dividends) and bonds (with coupons), gold does not produce income. Its price is therefore undermined by a rise in interest rates, because it then becomes less and less attractive to invest your money in gold rather than to invest it.

According to CME Group’s FedWatch tool, investors are currently pricing in rate cuts from the Fed of 75 basis points (0.75 percentage points) or three 25 basis point cuts.

Outside of monetary policy, gold was buoyed by significant purchases by central banks to fill their reserves, notably by the People’s Bank of China. Geopolitical tensions also played a role, with gold being seen as a safe haven.

Some experts, such as Bank of America, have also pointed to vigorous physical purchases, such as bars and coins, particularly by Chinese households. They are buying gold because their more traditional investments, such as Chinese stocks and real estate, are not attractive, as real estate in China has been in crisis for several years.

An ounce soon at 3,000 dollars?

“Like Goldman Sachs, our base case for gold is $2,700 (per ounce, Editor’s note) by the end of the year, thanks to strong demand from emerging market sovereigns and Asian households,” underlines Stephen Innes of Spi Asset Management.

Gold is “a compelling investment as we navigate the uncertain political and economic landscape that lies ahead,” he adds.

In a note published on Monday, UBS estimates that physical demand for gold is likely to increase, even with higher prices, between the end of the third quarter of 2024 and the first quarter of 2025. “This should provide the market with a good basis for the next leg of the upward trend,” judges the Swiss institution, which estimates that central banks will continue their purchases of gold in the meantime.

“The key macroeconomic events for gold in the coming months are the FOMC meetings in August and September and the US elections in November,” she adds.

Citi Bank, for its part, estimated in April that the ounce could even reach 3,000 dollars in the next 6 to 18 months. This is due to a strong physical demand and its attractiveness as a hedge against geopolitical risks, explained the bank’s commodities analysts quoted by CNBC.