In a remarkable surge, the price of gold recently reached unprecedented highs, exceeding $2100, or 47,000 Kč, per troy ounce (31.1 grams). Analysts point to the anticipation of the U.S. Federal Reserve initiating early-year interest rate reductions as the driving force behind this historic rally. Presently, U.S. interest rates stand at their highest level in over two decades.

Before nine o’clock in Central Europe, gold was trading at approximately $2080 per ounce. During Asian trading, the precious metal reached a peak of $2111.39 per ounce, according to reports from the Reuters agency.

Petr Lajsek, an analyst from Purple Trading, highlights the role of a weakening dollar in contributing to gold’s upswing. Market sentiments are already gearing towards expectations of the first interest rate cut, with speculation indicating a potential occurrence in the first quarter of the upcoming year.

Lajsek emphasizes, “Lowering interest rates should favor gold,” suggesting that the metal could sustain its rally into the following year as a result of this financial shift.

Additionally, geopolitical tensions in the Middle East are identified as another catalyst for the rising price of gold. Conflicts in the region have historically influenced gold prices, with October witnessing gold approaching the $2000 mark. In November, concerns temporarily eased, causing a dip to $1930 per ounce. However, renewed fears in December, marked by conflicts violating truces and escalating tensions in the Red Sea, have contributed to the recent surge. Attacks on transport ships, tankers, and even a U.S. destroyer by Yemeni drones have added to instability in the region, further favoring gold.

Analysts foresee a strong performance for gold in the coming year, with potential further increases beyond current levels. Factors such as conflicts in Ukraine and the Middle East, ongoing demand from central banks, and the expected decline in U.S. interest rates are anticipated to sustain the precious metal’s upward trajectory.

Article by Prague Forum