Gold prices held steady after a record-breaking rally that saw both the spot price hitting new highs and futures touching $2,000/oz for the first time.
Spot gold continued its historic run earlier on Tuesday, setting a fresh all-time high of $1,980.55/oz before pulling back on investor profit-taking. It was up 0.3% at $1,950.17 an ounce by 11:20 a.m. EDT.
US gold futures returned to $1,966.60/oz after reaching the $2,000/oz milestone, but still up by 0.5%.
“Gold was way overbought and needed to correct,” StoneX analyst Rhona O’Connell explained. “But at the moment everything is supportive; negative interest rates, intensifying geopolitical tensions and massive uncertainty surrounding the economic and financial fallout from the virus.”
The Federal Reserve, which is set to begin a two-day meeting that concludes on Wednesday, may provide more direction for the bullion market. There are some expectations that setbacks in the global fight against the pandemic will push Chairman Jerome Powell to signal that rates will stay near zero for longer.
Most banks remain bullish on the yellow metal, which has rallied over 27% so far this year, supported by growing doubts over an economic recovery from the covid-19 pandemic and escalating geopolitical tensions.
Wayne Gordon, executive director for commodities and foreign exchange at UBS Group AG’s wealth-management unit, told Bloomberg:
“Debasement of the US dollar, the more negative real rates, and you’ve still got lingering uncertainties around geopolitics and the US-China relationshi. That combination of things is what’s pushing gold harder.”
“Periods of consolidation should be healthy, and long-term investors are likely to take advantage of dips to build positions,” UBS said in a note, raising its 2020 average gold forecast to $1,740 from $1,650.
Goldman Sachs also raised its 12-month forecast for gold to $2,300, expecting further pressure on the dollar, while analysts at BNP Paribas expect prices to consolidate around $2,000 before increasing again.
Meanwhile, a more optimistic outlook was given by Barry Dawes, executive chairman at Australia investment firm Martin Place Securities, who predicted that gold “could hit $3,500 in two years.”