:max_bytes(150000):strip_icc()/GettyImages-2241924148-68d1fc11447f41e1a3a1bbd989682577.jpg "Where Do Gold Prices Go From Here? Here’s What Experts Say")
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KEY TAKEAWAYS
- The price of gold has rebounded over the past week after slumping for a few weeks following a series of record highs.
- Several demand drivers for the precious metal persist, most notably strong investment demand from ETFs.
- Additional policy or financial market risk could push prices up another 10%, UBS says.
The price of gold surged in anticipation of the federal government shutdown, but now that it’s over, the rally won’t necessarily end.
Ongoing robust investment demand amid continued economic uncertainty could keep driving gold higher, analysts say.
Gold has hit a series of record highs this year, with the spot price surging as high as $4,360 per troy ounce on Oct. 20 before slumping in the weeks that followed to as low as $3,970 early last week. The trend has reversed course over the past week, with the precious metal hitting a high around $4,260 Thursday morning before giving back some of those gains later in the day.
The renewed rally reflects a market environment that, despite the end of the shutdown, hasn’t changed materially. It’s an environment that has spurred hearty demand from gold-related North American exchange-traded funds.
It’s also one that UBS, in a research note, sees pushing gold to $4,700 if political or financial market risk increases.
Why This Matters to Investors
Investors often turn to gold as a safe haven during times of economic uncertainty and financial market volatility. The outlook for the U.S. economy is murky and concerns have grown about the sustainability of a rally that has lifted stocks to record highs. Some prominent investors in recent months have suggested that investment portfolios should have more gold exposure than has been typical.
Heavy Trading Volume
U.S. gold trading volume reached a record high of $208 billion per day in October. It rose 59% in September from the previous month and another 51% in October. Demand from ETFs triggered that volume, easily compensating for lower global demand for gold jewelry, bars and coins. In the U.S. alone, gold ETFs added 160% more physical gold to their holdings in the third quarter than during the same period a year ago.
That demand could persist, UBS said, considering the continued cloudy geopolitical outlook.
For one, the legislation ending the shutdown only funds the federal government through Jan. 30. Another partial shutdown could occur at that time if Congress doesn’t approve an additional continuing resolution or make progress on funding other departments.
Other Demand Drivers
In addition, a skeptical Supreme Court last week threw into doubt the legality of President Trump’s tariff policy based on the International Emergency Economic Powers Act (IEEPA). A decision could be forthcoming in several weeks, but uncertainty in the interim “should provide ongoing support for gold,” UBS said.
Likewise, the potential for additional interest rate cuts from the Federal Reserve, associated weakness in the U.S. dollar and elevated levels of global government debt all should send global gold demand this year to the highest level since 2011, UBS projects.
The World Gold Council, meanwhile, notes the retail demand has improved in recent weeks, with demand for gold bars in the U.S. “currently very strong.”
“Costco’s gold business is booming online and in-store,” the council said in a recent report, “driven by consumer trust as well as static pricing in a rising market.”
