The rally in the spot price of gold this week to a new record high of over $2,170 per ounce was the result of several financial and macro drivers that should generally keep prices elevated over 2024.
Investors grew more confident that the Fed would begin cutting rates from June, helped along by an increase in the unemployment rate in February. That said, the change in outlook was minor, particularly in comparison to the change in the gold price. The roughly 1% depreciation in the US dollar against several major currencies would have also helped to lift prices, making gold cheaper in local-currency terms. But similarly, the softening was not enough alone to explain the almost 5% weekly rise.
With prices this high, some deterioration in physical demand for gold is likely. And while we expect US interest rates to be cut over the second half of the year, this should already be largely factored into the price of gold. Accordingly, we are sticking with our forecast that prices will end the year at $2,100 per ounce.
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