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Gold Prices Soar to Record Highs Amid Central Bank Buying Frenzy

Gold prices have hit unprecedented levels, driven by robust purchasing by central banks and predictions of further increases amid potential easing of interest rates

Gold prices have surged to unprecedented levels, continuing a bullish trend as central banks globally amass gold bars at record rates. Experts suggest that the price of gold could climb even further, potentially reaching $2,300 per ounce in the latter half of 2024. This projection aligns with expectations of a potential easing of interest rates by the U.S. Federal Reserve, according to Akaš Doši, North America commodity research head at City, in a statement to CNBC.

Currently trading at $2,203 per ounce, gold’s valuation inversely correlates with interest rates. As rates decline, gold’s allure strengthens against fixed-income assets like bonds, which are likely to yield lower returns in a low-interest environment.

Market analysts anticipate gold prices will hit new heights in the second half of the year. They attribute recent price surges partly to significant futures trading, despite acknowledging the impact of robust physical gold purchases.

Shaokai Fan, the global head of central banks at the World Gold Council, noted that central banks, having acquired historic levels of gold over the past two years, remain potent buyers into 2024. This consistent demand has buoyed gold prices amidst high-interest rates and a strong dollar.

Typically, higher interest rates decrease gold’s appeal relative to interest-bearing assets like bonds, and a robust dollar can diminish gold’s value for holders of other currencies.

Gold’s enduring appeal as a safe-haven asset, particularly amidst geopolitical uncertainties, continues to drive strong physical demand. According to CNBC, over the past decade, Russia and China have been the largest gold purchasers, with China leading in both consumer demand and central bank acquisitions, showing no signs of slowing down.

In 2023, the People’s Bank of China emerged as the largest gold buyer, with Poland and Singapore following closely as significant net purchasers, underscoring a global trend towards increased gold investment among central banks.

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