Gold outlook: Safe-haven demand and monetary pivots to drive gold to new highs

Gold WideGold is expected to reach new all-time highs by year-end 2023, driven by safe-haven demand and monetary shifts, according to WisdomTree.

In Q2 2023, gold gained strength amid concerns over the banking sector and the US debt ceiling breach.

Investors have sought gold as a hedge, leading to a significant rise in net speculative positioning in gold futures.

Gold exchange-traded product (ETP) flows have also increased, though not as much as the futures market. If ETP investors return strongly, gold prices could climb higher.

Despite rising real bond yields, gold continued its ascent, outperforming the bond market.

Developing country central banks, including Russia, have diversified their reserves with gold to reduce reliance on the US dollar and its policies.

Singapore's Monetary Authority unexpectedly raised gold reserves by 45% in Q1 2023, indicating concerns about global financial conditions and expanding interest in gold beyond developing nations.

WidomTree said the US debt ceiling represents a potential catalyst for gold. US Treasury Secretary Janet Yellen warned of sovereign default or severe spending cuts without prompt action.

In such a scenario, demand for gold as a hedge is expected to increase.

WisdomTree's model presents three gold scenarios: consensus, bull and bear.

Consensus forecasts gold to surpass previous highs and reach $2,285/oz by Q1 2024. The bull scenario predicts $2,517/oz, while the bear scenario forecasts a retracement to $1,725/oz.

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