On September 26, UOB Bank (Singapore) released a report on the global gold price outlook. According to UOB, gold has surged significantly in 2024, rising from just over $2,000 per ounce in early January to the current level of above $2,600 per ounce at the end of September.
UOB assessed that the Federal Reserve’s rate-cutting cycle has weakened the US dollar, and lower interest rates are now providing a positive impetus for gold prices.
“We forecast the Fed to cut rates twice more by 25 basis points each before the end of 2024. The Fed’s rate-cutting cycle, along with expected weakness in both the US dollar and borrowing rates, will create significant momentum for gold prices,” said UOB analysts.
In this context, the general demand from central banks for gold allocation remains robust. A recent World Gold Council (WGC) survey indicated that central banks continue to view gold as an important store of value for their reserves and have signaled their intention to continue increasing their long-term allocation to gold.
Despite large-scale purchases in the past decade, China’s gold reserves are currently estimated to account for over 5% of the People’s Bank of China’s (PBOC) balance sheet.
UOB remains optimistic about gold and raises its forecast to $2,700 per ounce for Q4 2024.
According to the International Monetary Fund (IMF), the US currently holds approximately 261 million ounces of gold reserves, equivalent to 10% of the Fed’s current balance sheet size of $7.1 trillion.
Similarly, India reduced the import tax on gold from 15% to 6% in July. In August, India witnessed a surge in gold jewelry sales, with a 30% month-on-month increase.
“This was coupled with a surge in India’s gold jewelry imports to a new record high, as the total value of gold imports tripled from $3.13 billion in July to $10.06 billion in August,” the UOB report stated.
In its Q4 global outlook report, UOB provided a positive forecast for gold, projecting prices to reach $3,000 per ounce in Q3 2025. UOB has maintained a positive outlook on gold since March 2022 when gold prices began testing the $2,000 per ounce resistance level. Since then, UOB has consistently raised its gold price forecasts as positive catalysts have increased.
The bank remains optimistic about gold and has increased its price forecast to $2,700 per ounce for Q4 2024, $2,800 for Q1 2025, $2,900 for Q2 2025, and $3,000 for Q3 2025.
However, the main risk to UOB’s forecast is the potential for inflation to unexpectedly accelerate again, forcing the Fed to scale back the expected pace of rate cuts. This could lead to a resurgence of the US dollar and borrowing rates, which would be detrimental to gold prices.
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The Fed’s decision to slash interest rates by 0.5% has sent shockwaves through the market, with gold prices skyrocketing to unprecedented levels. This bold move has ignited a fiery rally in the precious metal, and experts predict that this is just the beginning. As the Fed hints at further rate cuts on the horizon, the stage is set for gold to continue its dazzling ascent, captivating investors and reshaping the financial landscape.
