Gold price sets new record, analysts make surprising predictions

With the strong rally, many experts believe this is just the beginning of a larger trend. In an interview with Kitco News, Michele Schneider - chief strategist at MarketGauge - said that if gold clearly breaks through the $ 2,800 / ounce level, prices could go straight to $ 3,000 / ounce.

As of 4 p.m. ET, February gold futures were last trading at $2,849.40 an ounce, up nearly 2% on the day. While many analysts are bullish on gold heading into the new year, most expect the precious metal to rally more strongly in the second half of the year.

However, some experts say geopolitical instability due to the policies of the new US administration of President Donald Trump is boosting safe-haven demand, pushing gold prices higher sooner than expected.

Notably, gold's rise came right after the US Federal Reserve (FED) decided to keep interest rates unchanged and signaled that the easing cycle could end sooner than market expectations.

In a press conference following the latest monetary policy decision, Fed Chairman Jerome Powell stressed that the committee is in no rush to cut interest rates as the inflation outlook remains uncertain and the labor market remains strong.

Ricardo Evangelista, market analyst at ActivTrades, said gold's safe-haven appeal was outweighing the threat of higher interest rates.

“Despite Jerome Powell’s signal that interest rates could stay high for longer due to persistent inflation risks and a strong labor market, the reaction in U.S. bond yields has been muted. Investors remain concerned about the potential impact of the new administration’s protectionist trade policies.

This creates a favorable environment for gold - a non-yielding asset that attracts safe-haven flows from investors seeking protection against economic uncertainty," Evangelista analyzed.

However, Paul Williams - CEO at Solomon Global - said that the increase in gold is not only due to the policies of the US President but also reflects a context of global instability.

“The performance of gold reflects the complex interplay of many factors affecting the economy today,” Williams said. “This is not a temporary price surge or simply a ‘Trump effect’, but rather a manifestation of a volatile geopolitical backdrop and deep global economic problems. The world order is becoming increasingly volatile, making gold an attractive option for hedging and protecting assets.”

Despite record high gold prices, Robert Minter, director of ETF strategy at abrdn, said demand for gold-backed exchange-traded funds (ETFs) remained subdued, suggesting there is still huge potential in the market.

Minter said it was only a matter of time before investors returned to gold as a safe haven, especially in the face of market volatility. “The current conditions are like trading in a mosh pit, you never know what’s going to happen next,” he said.

Some experts warn that the rally could stall in the short term. Analysts at TD Securities said that gold's bullish momentum is weakening and the market needs fresh impetus to continue its upward momentum.

However, with supporting factors such as geopolitical risks, the Fed's monetary policy and safe-haven demand, analysts still believe that the target of $3,000/ounce is only a matter of time.