Gold surges to new high as Wall Street predicts precious metal has room to run

Gold (GC=F) hit a new record on Tuesday to surpass $3,800 in intraday trading as Wall Street analysts predicted that the precious metal still has room to run.

Gold futures rose 0.8% to trade near $3,805 per troy ounce, while bullion for immediate delivery traded near $3,777 per ounce.

Wall Street sees further upside for the precious metal, with Goldman Sachs reiterating a forecast of $4,000 by the middle of next year and UBS predicting $3,900 during the same time frame.

“We think gold prices have further room to rally, as US real interest rates should fall further amid additional Federal Reserve easing and still elevated inflation,” Ulrike Hoffmann-Burchardi, chief investment officer at UBS Global Wealth Management, said on Tuesday morning.

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The strategist views the asset as an effective portfolio diversifier and hedge against political and economic risk.

Gold has been rallying on the heels of a declining dollar index (DX-Y.NYB) and expectations of a Federal Reserve easing cycle, which started last week with a rate cut of 25 basis points. More cuts could be on the way in 2025.

Inflows into physically backed exchange-traded funds (ETFs) hit a three-year high, while central banks have continued to accumulate their holdings of the precious metal.

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The rally also comes as the People’s Bank of China is weighing plans to use the Shanghai Gold Exchange to encourage other nations to buy bullion and keep it inside its borders, essentially becoming a custodian of foreign gold reserves, according to a Bloomberg report. The move could bolster Beijing’s influence in the bullion market.

The precious metal is up more than 40% year to date, with the past three sessions marking new highs.

Investors who may have bet against the precious metal’s rally may be getting caught in a short squeeze.

“Each fresh push higher has squeezed out short positions, forcing more covering and amplifying the momentum,” wrote David Morrison, senior market analyst at FCA, a fintech and financial services provider.

“While the pace of the advance may appear stretched, sentiment continues to favour the bulls, with gold maintaining its role as a preferred safe-haven asset,” he added.