Gold Surpasses Euro as the World’s Second Largest Official Reserve, JPMorgan Predicts Price Could Reach $6,000
Gold Surpasses Euro as the Second Largest Official Reserve
The European Central Bank (ECB) recently reported that driven by record purchasing volumes and soaring gold prices, gold will account for 20% of global official reserves in 2024, surpassing the euro at 16%, and trailing only the dollar at 46%.
Emerging Markets Intensify Purchases Amid Rising Risk Sentiment and De-Dollarization
The report indicates that Poland, India, and China are the largest gold buyers in 2024. The increase in gold holdings by central banks reflects a defensive posture against geopolitical risks and financial sanctions, as well as a deepening trend of de-dollarization. Gold prices are expected to rise nearly 62% in 2024, further boosting gold’s market value among reserve assets. This year, gold has also risen by 30%, making it one of the best-performing assets of the year.
Interest Rate Cuts Do Not Affect Gold Prices; JPMorgan Predicts $6,000
Gold prices have recently shown a strong upward trend, repeatedly setting historical highs, mainly driven by geopolitical risks, global central bank purchases, fluctuations in the dollar, and demand for safe-haven assets. Gold prices typically show a negative correlation with real yields, as higher interest rates tend to drive investors away from non-yielding gold. However, the ECB’s report indicates that this relationship broke down in 2022, as central banks accelerated gold purchases despite rising global interest rates to mitigate sanction risks.
JPMorgan states that a mere 0.5% shift of U.S. overseas assets into gold in the coming years could push gold prices to $6,000 per ounce by 2029. Meanwhile, Goldman Sachs raised its year-end gold price forecast to $3,700 per ounce in April, with expectations that gold prices may reach $4,000 by mid-next year.
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