Gold prices are forecast to continue to increase, but the increase will be limited.

The world gold price is going through a gloomy summer when the price remains above 3,300 USD/ounce but lacks the strength to break out. Although gold is still holding steady, experts still advise investors to buy when the price drops slightly, because they believe that the gold price will continue to increase, but the increase is limited.

Gold price forecast and gold industry stocks

According to Ms. Roukaya Ibrahim, Chief Strategist at BCA Research, the gold price increase is not only due to short-term factors but also due to long-term structural factors such as increased investment demand and strong central bank buying. Despite pressure from peak stock markets and high bond yields, gold still holds important support around the threshold of 3,300 USD/ounce.

Ms Ibrahim said: "The fact that gold prices have risen despite the adverse factors shows that this rally is a long-term trend, not a temporary one. Gold's resilience since mid-April further reinforces this view. Despite being oversold, gold has held firm, proving that there are always buyers on every dip."

As the global economy slows, gold is expected to outperform stocks. “Investment demand and central bank buying will offset the decline in jewelry and technology demand,” she said.

Gold mining stocks are also attractive thanks to record-high profit margins and free cash flow. "Gold mining companies' profits tend to be more volatile than the gold price. If the gold price continues to rise, the stocks in this sector will benefit greatly. Currently, gold mining stocks are still undervalued compared to the general level, creating opportunities for future growth," Ms. Ibrahim concluded.

The focus of the market today is the Kansas City Federal Reserve's annual Economic Policy Conference in Jackson Hole, Wyoming, which begins Thursday evening. Fed Chairman Jerome Powell is expected to announce the Fed's new monetary policy framework.

Powell's speech could provide important clues about the likelihood of a rate cut in September, an issue that has been divisive among Fed officials. In addition, the minutes of the latest Federal Open Market Committee (FOMC) meeting will also be released on Wednesday afternoon.

When the Fed cut interest rates, gold prices increased dramatically.

Ms Ibrahim predicts gold will rise sharply when the US Federal Reserve (Fed) starts cutting interest rates. The market expects the Fed to cut interest rates in September, followed by two more cuts later in the year.

“Gold has risen over the past three years despite high real interest rates and a strong US dollar. But going forward, these two factors will become the levers that push gold prices higher,” she said. “Real interest rates will fall as the US labor market slows or the Trump administration pressures the Fed to pursue an easing policy.”

BCA Research also forecasts a weaker USD in the coming months, which will further benefit gold. "The USD could fall as foreign investment flows into the US are not enough to offset the current account deficit," Ms. Ibrahim explained.

Rhona O'Connell, Head of Market Analysis for EMEA & Asia at StoneX, has just raised her 2024 average gold price forecast to $3,115 an ounce, up slightly by 1% from $3,078 previously. She noted that gold prices have been trading in a narrow range recently, with a 2% increase in the past week and 8% increase in the past three months.

According to Ms. O'Connell's prediction, gold prices in the third quarter will average around $3,320/ounce, but could fall to around $3,000 in the fourth quarter.

She believes that barring a major humanitarian crisis or unexpected event, gold’s recent peak of $3,500 in April is unlikely to be breached. “The market appears to be saturated, as the gold price reaction to the Fed’s actions has been increasingly muted,” she explained.

Despite market expectations that the Fed will cut interest rates in September and have two more cuts this year, gold has yet to break above $3,400 an ounce.

However, Ms. O'Connell also emphasized that gold prices are unlikely to fall sharply in the short term. Although central bank demand for gold has slowed, they still maintain their hoarding activities, which helps to strengthen market sentiment.

“The volume of purchases is less important than the fact that they are still buying. This shows that economic risks remain,” she said. “Moreover, the stock market is still overheated, even though the US economy is growing well.

If the market crashes, gold may initially fall as investors sell to raise cash, but demand for gold will then increase as it is seen as a safe haven asset."