Events that could push gold prices even higher
In late February, gold prices reached $2,048 per ounce, but in the past few days, they have surged to record-breaking levels. According to our Gold Revenue Allocation Model (GRAM), the significant increase in the 10-year US treasury bond yields (+34 points) seems to be the main factor behind the drop in gold prices over the past two months. However, gold prices have rebounded since late February, surpassing the $2,100 per ounce mark.
Looking ahead to the remainder of March, analysts from WGC believe that two important events in the Middle East and the US could impact gold prices.
Iran’s parliamentary elections: While the outcome may not cause significant waves, Iranian citizens are known to be significant buyers of gold, and the elections could potentially spur increased gold purchases.
FOMC meeting: The March FOMC meeting is expected to be highly important, as it will provide necessary signals to investors following a series of published data. Although the market isn’t anticipating any interest rate decisions, the meeting will help guide investors.
WGC also notes that “2024 carries many political event risks,” as several important elections could potentially redraw the political landscape. This cross-border significance and the interplay between politics and geopolitics are crucial for investors.
Analysts believe that geopolitical risks significantly impact gold prices. In 2023, gold holders, particularly in the Middle East and Europe, were reluctant to sell gold as prices soared and the economy became increasingly challenging.
WGC estimates that gold recycling in 2023 decreased by 30 tons to 70 tons.
“Geopolitical risks seem to be the most vital factor, which makes us closely monitor the elections in the coming months to see how they affect the price of gold,” the analysts noted.
WGC’s experts believe that Iran’s elections could be significant for gold investors for several reasons.
Firstly, Iran is the world’s sixth-largest gold buyer. Secondly, the election result could add uncertainty to an already volatile region. Lastly, Iran does not want to directly participate in the conflict in the region, but actions by representative forces increase the risk of Tehran being drawn in.
Despite the political variables, the Fed remains the biggest driver of gold prices in March. WGC believes that recent events have intensified the interest in the upcoming meeting.
WGC also highlights that the sudden price surge to new highs in early March was also triggered by recent strong buying demand in China and weaker-than-expected US ISM manufacturing index on March 1st.
This article was originally published on Kitco.