Gold prices have surged recently, fueled significantly by inflows into Asian exchange-traded funds (ETFs), according to Suki Cooper, precious metals analyst at Standard Chartered. However, Cooper cautioned that anticipated U.S. stimulus measures combined with easing geopolitical tensions could trigger a roughly 10% decline in gold prices before the end of the year.
In a Bloomberg Television interview on Thursday, Cooper explained that the gold rally has been supported by multiple factors. Central bank purchases since 2022 have played a crucial role in sustaining the upward momentum, providing a strong foundation against downside risks. More recently, over the past three months, ETF inflows have returned, marking a notable shift from earlier this year when such flows were largely absent during gold’s rally.
“This rally is unique in that it has several driving forces,” Cooper said. She noted that while gold took five years to hold above $2,000 per ounce consistently, it surpassed $3,000 and maintained that level within weeks. Unlike previous gold rallies closely tied to real yields, the current surge reflects broader market concerns, including recession fears, trade tariffs, potential trade wars, and geopolitical instability—all factors boosting demand for the precious metal.
Addressing whether gold is overbought following a 40% gain over the last twelve months, Cooper pointed out that tactical positioning remains near lows last seen in February 2024, significantly below peaks from 2019. Global ETF holdings also remain about 400 tonnes short of their 2020 highs. She emphasized that fresh demand, particularly from China, has contributed to the distinct character of the current rally.
Cooper further highlighted that central bank motivations for buying gold vary, ranging from maintaining target allocations and diversification to shoring up strategic reserves. Although central bank purchases have slowed slightly amid record-high prices, the underlying demand remains strong.
Looking ahead, Standard Chartered projects a potential 10% pullback in gold prices within the next seven months. This forecast is based on the expectation of U.S. stimulus initiatives and a reduction in geopolitical risks. Despite the anticipated correction, the bank believes gold prices will stabilize above the $3,000 mark, although the peak rally phase may have concluded.
On Thursday morning, spot gold prices fell 0.5% to $3,297.33 an ounce by 10:30 a.m. ET, reversing an earlier rise to a two-week high of $3,345.33. U.S. gold futures followed suit, dropping 0.6% to $3,294.70 an ounce.
