The price of gold has risen to its highest level in a month amid favorable economic conditions and as geopolitical tensions rise with the escalating conflict between Israel and Hamas. Furthermore, gold price predictions show that it is only going to go up more.
The current environment is underpinning the price of gold, which has now gained more than 5% since Hamas attacked Israel on Oct. 7. Year to date, the price of gold is up nearly 20%, and many analysts see the price testing new all-time highs as both geopolitical events and current economic trends send investors running towards the precious metal.
Morgan Stanley Says ‘Time to Buy’
The spot price of gold is currently at $1,981.22 an ounce and nearing its all-time high of $2,074.88 per ounce. Many analysts see gold reaching a new all-time high before year’s end amid a flight to safety among investors and away from more risky stocks. One gold bull, Peter Schiff, the CEO of asset management firm Euro Pacific Capital, has predicted that the price of gold will hit $5,000 an ounce.
While most professional investors and analysts aren’t as bullish as Schiff, the consensus view is for the price of gold to continue rising in the near-term. In June of this year, before conflict erupted in the Middle East, investment bank Morgan Stanley (NYSE:MS) put out a bullish note to clients titled “Gold’s Time to Shine?“
In the note, Morgan Stanley said of gold that “Now may be a good time to add it to your portfolio,” noting that a weaker United States dollar is good for the price of gold and that central banks around the world are buying up gold, which is also helping to push the price upwards. Morgan Stanley points out that “In 2022, central banks bought gold at the fastest pace since 1967, at about 1,136 tonnes. This year, central bank purchases hit 228 tons in the first quarter, breaking the first-quarter record previously set in 2013.”
Central banks have been loading up on gold as a way to hedge against the inflation that most countries continue to grapple with, and as many countries look to diversify away from major currencies that are softening, such as the U.S. dollar, Euro, and British pound. It all adds up to favorable conditions for the yellow-colored precious metal. Clearly, Morgan Stanley has high gold price predictions.
Bank of America Sees Gold at $2,200
Gold continues to be seen as a safe port in a market storm by investors. The price of gold hit its all-time high in August 2020 during the depths of the Covid-19 pandemic, another shock that rattled stock markets around the world. However, currently, the price of gold is also getting a lift from growing expectations that interest rates have likely peaked in the U.S. and will be coming down in 2024.
On Oct. 19, U.S. Federal Reserve Chair Jerome Powell gave a speech to the Economic Club of New York. As Powell spoke, futures traders on Wall Street erased any possibility of a rate hike at either of the Fed’s two remaining meetings this year–on Nov.1 and Dec. 13. Markets are now betting that the U.S. central bank’s next move on interest rates will be to lower them, with the first cut likely in the middle of next year.
Gold is viewed by most traders and investors as a long-duration asset, which makes it sensitive to changes in interest rates. Morgan Stanley points out that, throughout the past 25 years, the price of gold has risen 10% for every percentage point decline in interest rates. With the Fed expected to start cutting rates in 2024, the price of gold can be expected to move higher.
Morgan Stanley isn’t the only Wall Street firm that is bullish in its gold forecast. As early as April of this year, Bank of America (NYSE:BAC) forecast that the price of gold would reach a new all-time high of $2,200 by December and urged investors to buy gold-focused exchange-traded funds (ETFs).
What’s Next for Gold Price Predictions
Conditions are clearly working in gold’s favor. Overseas, war in the Middle East has investors feeling nervous and seeking the relative safety of gold, while at home, expectations of declining interest rates should further lift the price of bullion. Add in that central banks around the world are buying gold at a record pace and the U.S. dollar has softened in recent months, and the outlook for gold looks very bright indeed. Gold price predictions show that the price of gold isn’t going to lose steam any time soon.
On the date of publication, Joel Baglole held a long position in BAC. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
