In a recent report, American commercial banks predict that gold prices could rise to as much as $3,000 per ounce due to various factors such as geopolitical tensions, the upcoming U.S. elections, and increased central bank purchases. They believe that the potential for a continued increase in the federal deficit following the elections could place additional pressure on the U.S. Treasury market, making gold an even more attractive investment.
As the situation in the Middle East escalates and the U.S. election remains tightly contested, investors are flocking to safe-haven assets, pushing gold prices to new historic highs. On October 18, spot gold surpassed the $2,700 mark, marking a roughly 30% increase this year.
The combination of heightened geopolitical tensions and election-related risks has contributed to a surge in market risk aversion. On October 17, Israel announced the death of a key Hamas leader in Gaza, while Hezbollah declared that its confrontation with Israel had entered a “new stage of escalation.”
With just three weeks left until the November 5 election, investors are starting to reassess the risks surrounding the vote. Given the volatility of electoral developments and geopolitical uncertainties, strategies that hedge against a potential Trump victory may continue to drive demand for gold.
Another factor contributing to the rising gold prices is the likelihood of a retreat in the U.S. dollar. Technically, the dollar’s recent rebound appears to be losing steam, and a pullback could be on the horizon. Furthermore, better-than-expected retail sales figures for September have dampened expectations for monetary easing, further heightening safe-haven sentiment.
Looking at the broader picture, the Federal Reserve’s recent move to lower interest rates has fueled optimism, contributing to gold’s upward trajectory. Strong buying activities from global central banks also serve as a long-term support for gold prices.
Michael Widmer, a commodity strategist at American banks, noted in a recent report that given the challenges posed by U.S. debt issues, gold is likely to become more appealing. Regardless of whether Trump or Kamala Harris wins, the United States faces a scenario of expanding deficits.
Moreover, as countries respond to climate change, increased fiscal spending could be on the horizon, along with potentially more challenging demographic dynamics, which could also lead to higher defense spending.
In light of these factors, Widmer believes that gold could indeed soar to $3,000 per ounce: “As investors worry that rising demand for U.S. spending could impact the Treasury market, gold may emerge as the ultimate safe-haven asset.”
