Next Stop $2,300?

The price of gold broke through $2,200 an ounce on March 20 as Federal Reserve policymakers indicated they were standing by plans to cut interest rates three times in 2024. Lower interest rates are generally positive for non-yielding gold.

With gold reaching new all-time high levels, a growing number of investors, and precious metals analysts, are jumping on gold’s bullish bandwagon. “You want to be long gold at this juncture,” Ehsan Khoman, Head of Commodities Research at Japanese bank MUFG, told CNBC. “It continues to remain a very strong conviction story.”

Investment firm Goldman Sachs is calling for gold to hit $2,300 this year, while JP Morgan Chase is more optimistic, pointing to gold as its number one pick in the commodities market. “We believe that $2,500 is a possibility,” the bank’s Head of Global Commodities Strategy Natasha Kaneva told Bloomberg TV. “We need a confirmation from continued moderation in the inflation and in the jobs numbers as well, and the confirmations that the Fed indeed is cutting.”

Federal Reserve Chairman Jerome Powell offered that assurance during his March press conference, maintaining that the central bank does not plan to overreact to recent inflation reports that were higher than expected. “I think they haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward two percent,” said Chair Powell.

But the fact remains that inflation is still well above the Fed’s target of two percent, and until it does moderate there is little reason for central bankers to drop interest rates. Therefore, gold investors would be wise to buy for the long-term rather than anticipating a rapid rise to $2,300 and beyond.