(Kitco News) - The gold market is finding new resistance at $2,400; however, one commodity brokerage firm expects that it’s only a matter of time before prices move higher.
In a report published Thursday, commodity analysts at Sucden Financial said that they expect the precious metal to push above $2,500 an ounce by the end of the third quarter.
“With resilient physical demand and robust central bank acquisitions, alongside easing inflation and increased market volatility, gold's outlook remains positive,” the analysts said in their quarterly outlook.
At the same time, Sucden remains optimistic about silver even as prices struggle in the face of gold’s solid uptrend. Silver has been unable to hold support above $29 an ounce this week.
“We expect silver to gain attractiveness as both a safe-haven asset and a vital industrial metal. We anticipate the price of silver to appreciate by the end of the quarter, surpassing $32/oz in Q3 2024,” the analysts said in the report.
The analysts said that the biggest factor supporting precious metals prices in the near term remains solid expectations that the Federal Reserve will cut interest rates in September, which is in line with the firm’s expectations.
While U.S. economic growth has remained fairly resilient, falling inflation pressures have given the Federal Reserve room to ease interest rates. According to the CME FedWatch Tool, markets have all but completely priced in a rate cut at the end of the quarter.
“While the market has already priced in the interest rate cut, the actual policy decision would reassure investors about the direction of rates in the future, fostering sustained inflows,” the analysts said.
Specifically looking at gold, Sucden said that it expects the precious metal’s uptrend to remain well supported as geopolitical uncertainty drives physical safe-haven demand.
The analysts also expect to see healthy consumer demand in critical markets like India, which they note represents 20% of global demand.
“Expectations of strong economic growth in the country, where gold's role as a store of value is well established, should work to the precious metal's advantage,” the analysts said.
Sucden also expects central banks to continue to buy gold through 2024 even if the pace has slowed from record levels set in the last two years.
Looking at silver, Sucden remains bullish on the precious metal as industrial demand continues to grow. The analysts said that the AI boom is transforming the global economy, which will require more silver.
“The rapid growth of generative AI will necessitate substantial upgrades to existing infrastructure and hardware to support its broader application across the economy,” the analysts said in the report. “Advanced semiconductors, data centers, and consumer electronics are all poised for a significant increase in demand.”
“Furthermore, the growth of AI-powered computing and power-intensive data centers will lead to massive electricity consumption,” they added. “The IEA projects that power demand from data centers will exceed 1,000 TWh by 2026, which is comparable to Japan's total power demand and nearly double the consumption of data centers in 2022. This surge in industrial demand and increased power usage underscores silver's critical role, potentially driving its prices higher as the AI revolution progresses.”
