Gold prices soar to record highs, mark biggest weekly gain since 2020 | Hindustan Times

Gold prices surged to record highs, achieving their largest weekly gain since 2020, driven by escalating US-China trade tensions, expectations of Federal Reserve rate cuts, and concerns over regional banks, which fueled safe-haven demand. The precious metal, up 7% for the week despite a Friday dip to around $4,260, is also benefiting from record central bank purchases and significant gold-backed ETF inflows. Major banks like BofA, Goldman Sachs, and JPMorgan have raised their price targets, with some forecasting gold could reach $6,000 per ounce in the coming years, though experts caution about a potential bubble if global uncertainties persist.

Analysis

Gold prices surged to record highs, achieving their largest weekly gain since 2020, despite a Friday dip to $4,260 an ounce after an intraday peak of $4,380. This 7% weekly increase was driven by a "perfect storm" of factors including escalating US-China trade tensions, expectations of Federal Reserve rate cuts, and concerns over regional bank stability. These elements collectively fueled significant safe-haven demand.

Robust demand is further evidenced by record gold purchases from central banks globally and substantial inflows into gold-backed Exchange Traded Funds (ETFs) last quarter, indicating strong retail and institutional appetite. A weaker US dollar and falling interest rates have also enhanced gold's attractiveness. The Bank of America Fund Managers Survey identified gold as the market's "most crowded trade," with 35% of managers holding 2-4% of their portfolio in gold.

Major financial institutions have significantly raised their gold price targets, with BofA, Goldman Sachs, and JPMorgan forecasting prices potentially reaching $4,900 to $6,000 per ounce by 2029. However, analysts like Kyle Rodda describe the surge as "parabolic," cautioning it could signal global instability or speculative excess. The rally's sustainability hinges on future reactions to inflation, interest rate policies, and geopolitical risks, with a potential for a "bubble."

Key Decisions for Investors

• Investors should consider maintaining strategic exposure to gold given persistent geopolitical uncertainties and expectations for future rate cuts, which continue to drive safe-haven demand.
• It is prudent to monitor for signs of speculative excess or a potential market correction, as the current surge has been described as 'parabolic' and gold is identified as a 'most crowded trade'.
• Evaluate current portfolio allocations to gold and gold-backed ETFs, weighing the raised price targets from major banks against the inherent risks of a rapidly appreciating asset class.