The FED's monetary policy is still a major barrier
Commodity analysts at Metals Focus predict gold prices will reach a high of $3,000/ounce in the second quarter of this year. However, they also note that in the short term, the market may face profit-taking pressure.
This assessment was made when gold prices recovered after selling pressure last week.
The flexible monetary policy of the US Federal Reserve (FED) continues to be an obstacle for gold. Minutes from the Fed's January monetary policy meeting showed that the central bank was in no rush to cut interest rates due to concerns that inflation would remain high.
The market is not currently expecting the Fed to cut interest rates ahead of the July meeting. However, according to Metals Focus, US monetary policy and the strength of the USD are now only secondary factors affecting gold prices.
The main driver for golds strong rally this year is increased economic uncertainty, along with political concerns about the new US administrations tariff policies, analysts said.
Gold and silver pour into New York, London market faces difficulties
Metals Focus said physical gold and silver are pouring into New York's reserves as banks and investors seek to protect their assets from risks from new tax policies. This makes it difficult for the London gold and silver trading market due to lack of liquidity. As demand strengthens but supply is less flexible, gold and silver prices could continue to rise in the short term.
Although geopolitical tensions are still a factor supporting gold and silver prices, Metals Focus warns that the market is becoming more complex, carrying many potential risks.
In the US, demand for gold jewelry is still under pressure due to high prices, but the decline is not as serious as initial concerns. The US is currently the world's third largest jewelry market.
We estimate that gold jewelry sales in the fourth quarter of 2024 will only decrease by 4% compared to the same period last year (by weight). This result is better than expected, thanks to the stable labor market and shopping demand during Christmas, despite tightening household budgets" - Metals Focus commented.
However, this year, the demand for jewelry may decrease more strongly due to the trend of fewer weddings.
We are still cautious about the prospect of consuming gold jewelry this year. Even as the number of engagement parties increases again, the jewelry industry will still face challenges from rising gold prices, especially as the political situation shows no signs of stabilizing. Total demand for the year could fall 13% from the 2021 peak and even below the 2019 level, Metals Focus forecasts.
