By Joe Hoppe


Gold prices have performed remarkably well so far this year, with demand for the precious metal high amid global economic uncertainty and central bank buying, but will likely need new catalysts to break out of their current range, according to a new report.

The extent of gold's rally upward or slump downward over the coming months will reflect a combination of factors, the World Gold Council said Tuesday. Analysis suggests the current gold price broadly reflects consensus expectations for the second half, taking into account economic growth, interest rates and inflation.

Overall, gold spot prices saw a nearly 13% increase during the first half of the year, outclassing most other major commodities and asset classes, despite high interest rates around the world and a strong U.S. dollar, usually headwinds for bullion, the WGC said.

Rather than driving prices downward, the traditional relationship with interest rates and the greenback has likely prevented gold from rising higher, with other, more dominant factors offsetting pressure.

"Support has come from continued purchases by central banks, strong Asian investment and resilient global retail consumer demand," the industry body said in its mid-year report.

Monetary policy is also likely to play a key part in gold's second-half performance, with falling rates in developed markets likely to attract more western investors, along with continued safe-haven demand amid a complacent equity market and consistent geopolitical tensions, the WGC said.

Western investors have largely sat out gold's rally in 2024 to date. The absence of strong Western flows along with gold's strong performance suggests that the market still isn't saturated, and Western investment could grant the precious metal another leg-up, the WGC said.

Since the European Central Bank cut rates in May, European gold exchange-traded funds have experienced inflows, and while a Federal Reserve cut has been priced in by the market for later this year, the actual decision should reassure investors about the direction of monetary policy, fostering sustained inflows.

On the other hand, if rates remain higher for longer, strong central bank demand drops drastically, or Asian investors enthusiasm flips, prices could pull back in the second half.

"As we look forward, the key question in investors' minds is whether gold's momentum can continue or if it is running out of steam... the global economy, as well as gold, seem to be waiting for a catalyst," the WGC said.

Gold future prices hit a peak this year of $2,448.8 a troy ounce on April 12, but have since moved back to $2,333.7 a troy ounce.


Write to Joe Hoppe at joseph.hoppe@wsj.com


(END) Dow Jones Newswires

07-02-24 0814ET