With the latest inflation data released earlier today, for gold investors, the question of where gold prices are headed remains top of mind.
While many analysts expect the yellow metal to eventually continue its rally this year, one believes it will hold above one key level.
Gold prices rally in 2024
Gold hit a high of almost $2,450 in May, and despite a recent pullback to around $2,300, many remain bullish. For example, Citi analysts said in a note that gold prices could surge up to $3,000 over the next 12 months.
“The gold price path is unlikely to be linear, but average prices should trend higher in 2H’24 and 2025,” said Citi.
Meanwhile, when it comes to gold miners, Taylor Krystkowiak, Vice President and Investment Strategist at Themes ETFs, said in a recent research piece that they have more room to run, noting low valuations.
“In 2011, the price-to-book ratio of both the S&P 500 and miners were about 2x— today, the S&P 500 is trading at around 4.8x, whereas miners are at around 1.9x,” he wrote. “The disconnect in valuations coupled with gold breaking out to new highs this year suggests that the sector does indeed have more room to run.”
Furthermore, Krystkowiak explains that stagnant supply from declining production in the face of rising demand from central banks continues to be a tailwind for high gold prices and miners.
“The recent pullback in gold prices could be an opportune time to get into gold miners because their valuations are still quite attractive on a historical basis,” he declares.
Gold prices forecast for 2024
However, the forecast for gold prices for the rest of this year isn’t as bullish. Speaking to Investing.com, Krystkowiak said that “given robust demand and limited supply, it is likely that the price of gold will hold above $2,200/oz through the end of 2024.”
He explains: “This projection is also supported by the past trading patterns of gold, which has historically traded sideways in the wake of notching a new all-time high as it consolidates around its new price level.”
With current prices holding above $2,200/ounce, the price of gold remains above the average all-in sustaining cost of $1,345/ounce for gold miners, and as a result, Krystkowiak says gold miners will continue to benefit from significantly higher margins on their gold production for the foreseeable future, even if gold prices weaken somewhat relative to current levels.
His sentiment for gold echoes that of Citi, which said it sees the market “supported well above $2,000-2,200/oz and regularly testing nominal ATHs into end-2024” before surging to $3,000 in 2025.
“A negative turn in US growth exceptionalism should be positive for gold, enhancing bids for duration and haven assets, all else equal,” the note continues,” says Citi.