(Kitco News) - While gold prices have reached new all-time highs in recent days, momentum in the marketplace is starting to wane. Although gold remains in a solid uptrend, one research firm has said that investors might need to be a little more patient when it comes to reaching their $3,000 target.
Commodity analysts at Metals Focus said that they expect gold prices to hit a high of $3,000 an ounce by the second quarter of this year; however, they noted that there are risks of profit-taking in the short term.
The comments come as gold prices have shaken off last week’s selling pressure. Spot gold last traded at $2,944.90 an ounce for a gain of 0.41% on the day.
The Federal Reserve’s fluid monetary policy stance remains a significant headwind for gold. The minutes from the Federal Reserve’s monetary policy meeting in January reflect the current sentiment that the central bank is in no rush to cut interest rates as inflation risks remain elevated.
Markets do not expect the Federal Reserve to lower rates before its July meeting. However, Metals Focus noted that U.S. monetary policy and the strength in the U.S. dollar have become secondary factors for gold.
“Gold’s strength this year has been mainly driven by heightened economic uncertainty and, to a degree, political uncertainties linked to the new U.S. administration’s policies, in particular, its strategy relating to widespread tariffs,” the analysts said.
Metals Focus explained that physical gold and silver have flooded into vaults in New York City as banks and investors hedge against potential tariffs. This has created significant liquidity issues in London’s Over-the-Counter (OTC) markets. Solid demand in an illiquid market is providing some short-term bullish momentum for gold and silver.
While geopolitical uncertainty continues to support gold and silver, Metals Focus noted growing risks in a more nuanced marketplace.
The London-based research firm explained that U.S. jewelry demand continues to struggle, albeit less than expected, in a higher-price environment. They noted that the U.S. jewelry market is the world’s third-largest.
“We estimate that sales only fell by 4% year-over-year in weight terms in Q4, and this result was better than many research contacts had feared earlier in 2024. Key reasons for this include a still robust job market, [and] the ‘need’ to buy for Christmas even with a strained household budget,” the analysts said.
However, market weakness is expected to be sharply felt this year, in part due to a structural decline in the number of weddings.
“We remain cautious regarding total gold jewelry demand for this year,” the analysts said. “Even if we see engagement numbers recover, the industry will still have to manage a growing share of pieces being priced at yet higher levels, especially as political uncertainties have scarcely eased. As such, the full-year demand could end up 13% lower than the 2021 peak and even fall below 2019 levels.”
