Gold prices expected to rise amid Federal Reserve rate cuts

YLG Bullion International advises investors to accumulate gold as prices consolidate, with expectations of a rise in the medium to long term, particularly after anticipated interest rate cuts by the Federal Reserve later this year.

Global gold prices have increased by 13.2% this year as of today, driven by high demand from central banks and institutional investors amidst tightening supply, according to YLG chief executive Pawan Nawawattanasub. Domestically, prices surged by 20.2%.

Gold prices fell from a record high of US$2,449.89 per ounce in mid-May to approximately $2,380 on Friday, which was attributed to profit-taking.

However, gold prices remain on an upward trend, supported by several factors such as concerns over global economic growth, geopolitical conflict, and accumulated purchases by central banks around the world. said Pawan, adding that limited gold supply is also driving prices over the long term.

The US Geological Survey reported that only 59,000 tonnes of gold supply remains globally, with an annual production average of 3,000 tonnes. This indicates that gold reserves may last for 19 years unless new deposits are found.

Additionally, around 1,000 tonnes of gold are brought back into circulation annually through remelting, but this combined with mining output still falls short of meeting the annual global demand of over 4,000 tonnes, said Pawan.

“All factors clearly support the upward direction of gold prices in the long term, especially over the next one to three years when the market expects global interest rates will gradually decrease.”

Investors are advised to stay informed on economic conditions due to short-term price fluctuations.

Pawan highlighted factors to monitor, including US economic data in manufacturing and service sectors, inflation, the labour market, and the monetary policies of major central banks.

YLG predicts that gold prices will encounter resistance at US$2,450-US$2,500 per ounce, and should they surpass this level, the next resistance point is US$2,650 per ounce. For short-term investments, the recommendation is to buy when prices drop to US$2,277-US$2,300 per ounce.

Gold trader Hua Seng Heng noted that prices rose sharply for the second consecutive day today after weekly US jobless claims increased more than expected, supporting the case for a Federal Reserve rate cut.

The European Central Bank lowered its key interest rates by 0.25 percentage points to 3.75% yesterday, which has led market participants to believe the Fed may follow suit, reported Bangkok Post.