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Gold prices hold steady, still above $2,000 threshold

As investors continue to be cautious of pivotal interest rate decisions from the global central banks, notably the U.S. Federal Reserve (Fed), gold prices have demonstrated minimal change on Tuesday. As of 01:54 GMT, spot gold price recorded a modest loss of 0.1 percent, reaching $2,019.89 per ounce. Similarly, U.S. gold futures declined by 0.1 percent, hitting US$2,021.

Financial markets
Looking at financial markets, the U.S. dollar index remained stable, hovering near its one-month high of 103.69 achieved last week. Meanwhile, Japanese shares achieved a remarkable 34-year high. This is fueled by expectations that the Bank of Japan will maintain its ultra-dovish monetary policy. In contrast, Chinese stocks faced a downturn following a challenging trading session.

Market participants are also keen on the decision that the European Central Bank (ECB) will make. Analysts predict that the ECB will likely maintain its current monetary policy stance. ECB is set to meet on Thursday.

Poised for gains
Amid these developments, gold prices have consistently stayed above the $2,000 mark in the new year. For the rest of 2024, J.P. Morgan commodities analysts are optimistic that gold and silver will have notable gains. This positive outlook is attributed to the potential for rate cuts and a resurgence of investment demand in these precious metals.

Nonetheless, Gregory Shearer, the company’s head of Base and Precious Metals Strategy, warned that precious metals might lose some momentum gained from high inflation levels.

“Across all metals, we have the highest conviction on a bullish medium-term forecast for both gold and silver over the course of 2024 and into the first half of 2025, though timing an entry will continue to be critical,” he elaborated.

Shearer added, “At the moment, gold still appears quite rich relative to underlying rates and foreign exchange fundamentals, and still looks vulnerable to another modest retreat in the near-term, as Fed rate cut expectations are now running earlier than our forecasts.”

He advised that any upcoming price dips should be seen as opportunities for buying. This is in anticipation of a significant rally starting in mid-2024, coinciding with a slowdown in U.S. GDP growth.

J.P. Morgan Research has adjusted its forecast, now expecting the Fed to implement cuts totaling 125 basis points in the latter half of 2024, an increase from their previous prediction. This adjustment aims to mitigate a potential U.S. recession.

The firm’s gold price predictions hinge on Fed forecasts, which see moderate core inflation of 2.4 percent this year and 2.2 percent in 2025 before aligning with the 2 percent target by 2026.