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Gold prices hit a new record for the second day in a row on Monday – with the spot price hitting $2,100 – as the global rush for bullion looks set to continue.

Gold prices are on track to hit new highs next year and could stay above $2,000, analysts said, citing geopolitical uncertainty, a likely weaker U.S. dollar and possible interest rate cuts.

Prices for the yellow metal have risen for two straight months as the Israeli-Palestinian conflict boosted demand for the safe haven and expectations of interest rate cuts provided further support. Because of its status as a reliable store of value, gold tends to perform well during times of economic and geopolitical uncertainty.

“The expected decline in both the USD and interest rates in 2024 are key positive drivers for gold,” Heng Koon How, head of market strategy, global economics and market research at UOB, told CNBC by email. He estimated that gold prices could reach as high as $2,200 by the end of 2024.

Another analyst is also optimistic about the prospects for gold.

“The leverage in gold is simply lower this time compared to 2011… the price is rising above $2,100 and $2,200 an ounce is being looked at,” said Nicky Shiels, head of metals strategy at precious metals firm MKS PAMP.

All that glitters is gold

Spot gold prices rose to a new record high of $2,110.8 an ounce on Monday before giving back some gains. The current trading price is $2,084.59.

Gold hit $2,075.09 on Friday, surpassing a valuable intraday record high of $2,072.5 set on August 7, 2020, according to LSEG data.

Bart Melek, head of commodity strategies at TD Securities, expects gold prices to average $2,100 in the second quarter of 2024, with heavy central bank buying serving as a key catalyst for the price rise.

According to a recent survey by the World Gold Council, 24% of all central banks intend to increase their gold reserves in the next 12 months as they become increasingly pessimistic about the US dollar as a reserve currency.

“This potentially means higher demand from the public sector in the coming years,” Melek said.

A possible change in the Fed’s monetary policy course in 2024 is also conceivable, he added. Lower interest rates tend to weaken the dollar, and a weaker dollar makes gold cheaper for international buyers, leading to higher demand.

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Gold prices in the last six months

While Fed Chairman Jerome Powell on Friday pushed back on expectations for any aggressive rate cuts ahead, his comments suggested the Fed may be done raising rates, at least for now.

“We believe the main factors that will boost gold in 2024 will be interest rate cuts by the US Federal Reserve, a weaker US dollar and high levels of geopolitical tensions,” BMI, a research unit of Fitch Solutions, said in a current announcement.

Source : www.cnbc.com

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