Look beyond the Fed for second half gold price boom

Like stocks and bonds, gold just seems to want to go higher, and potentially for the same reason. The Federal Reserve is beginning to look like it is finally preparing to cut rates, because it believes it’s got inflation under control. But could there be more to gold demand than this?

If gold offers a barometer of financial or political stress, last weekend’s attempted assassination of Donald Trump failed to light a fire under the bullion market on Monday morning. Instead, this move began with Jerome Powell’s comments about inflation falling to target, clearing the path to a September rate cut.

Gold shrugged off Tuesday’s stronger-than-expected retail sales data, and it continues to ignore both the slowdown in Asian consumer demand and the grinding collapse in Western retail investment flows.

Comex speculators in gold futures seem to be making the running tick-by-tick, underpinned by ongoing demand from central banks wanting to spread their risk and de-dollarize at least some of their reserves before Trump re-enters the White House.

This is not just about gold vs the dollar

While gold has only hit a new record in USD terms, this week’s steep rise to date isn’t just a dollar story. The precious metal is now barely 1% away from April’s peak in Chinese Yuan or Euro terms, and it’s less than 3% off this spring’s record for UK investors. That’s encouraging more profit-taking among private investors for now.

Geopolitics matters, not democracy, for deciding the direction of safe-haven gold in the second-half of 2024 and those global tensions could drive the gold price to a new record high by New Year.

Gold bullion prices will rise a further 11.2% according to the average year-end forecast given in BullionVault’s latest customer survey, topping £2,000 per Troy ounce for the first time ever by 2025 after setting a run of new all-time highs already this year.

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The US election in November won’t have any sway over the gold price, according to 2-in-5 investors worldwide (40.7%) who were responding to BullionVault’s latest customer survey Instead – and in contrast to the US ballot – geopolitics is seen as the number one driver of precious metals prices between now and New Year (29.7% of responses), topping BullionVault’s twice-yearly survey for the first time since the start of 2020.

According to Adrian Ash, Director of Research at BullionVault, because gold tends to do well when other assets do badly, investing in bullion is often associated with dark times. The ongoing war in Ukraine, the conflict in Gaza and rising tension between China and the US over Taiwan all means geopolitics is firmly at the forefront of investors’ minds. “There’s little darker than democracy’s impact on the world being crowded out by geopolitics,” he said.

LBMA forecasting higher gold prices

With one exception, all the analysts who responded to the latest poll from the London Bullion Market Association are predicting that the gold price will trade higher during H2 2024 than the record price of $2480.25 achieved this week. An average of forecasts implies the gold price may touch $2547.

Without exception, all analysts believe the price will come off as 2024 comes to a close. The average of year-end forecast is $2395, some 6.% below the anticipated average high.

It is, however, clear that many analysts were surprised by the strength of gold through the first half of this year with the original full year average price (from the LBMA survey published in early February) coming in at $2059, some 7.1% below the actual average for the first six months of the year of $2205, and 12.5% below the full year average now predicted.

Right wing politics is not moving the gold price

While much of the media appears surprised by the direction of democratic politics in the Western world, financial markets including safe-haven gold were unmoved by the win for the National Rally in the first round of the parliamentary elections in France, just like bullion prices didn’t move on Trump’s clear win over Biden in the televised US presidential debate.

That contrasts with the UK’s 2016 Brexit referendum shocker, when gold leapt 22% in GBP terms inside six hours, or Trump’s first White House victory that November, when gold spiked by 6% against the USD only to fall hard by the time he took office the following January.

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