The gold price soared to a new all-time high of $2,078.36 per ounce on Thursday, May 4, as investors sought refuge in the safe-haven asset amid rising COVID-19 cases, geopolitical tensions and economic worries.
The yellow metal started the week on a bullish note, gapping higher at the opening and closing the gap on Monday, May 1. The gold price was supported by falling US Treasury yields and a weaker US dollar, which made the metal more attractive for foreign buyers.
The gold price also benefited from increased demand for physical gold, especially from emerging markets such as India and China, where consumers and investors were buying gold ahead of the festive season and as a hedge against inflation.
The gold price continued to rally throughout the week, breaking above the $2,000 level on Tuesday, May 2, and reaching new record highs on Wednesday, May 3, and Thursday, May 4. The gold price was boosted by the uncertainty surrounding the US debt ceiling debate, the Federal Reserve’s monetary policy stance and the health of the US banking sector.
The gold price faced some resistance on Friday, May 5, after the European Central Bank (ECB) hiked rates by 25 basis points and signaled more tightening ahead. The ECB’s hawkish move boosted the euro and dented the appeal of non-yielding assets such as gold. However, the gold price remained above $2,000 per ounce at the time of writing, up more than 1.5% for the week.
The outlook for the gold price remains positive, as analysts expect the metal to extend its gains in the coming weeks and months. The main drivers for the gold price are likely to be the persistent COVID-19 pandemic, which poses a threat to global growth and recovery; the geopolitical risks stemming from conflicts in Afghanistan, Ukraine and Taiwan; and the inflationary pressures that could erode the value of fiat currencies.
Some analysts also expect the Federal Reserve to maintain its accommodative monetary policy stance for longer than expected, which could weigh on the US dollar and support the gold price. The Fed is scheduled to hold its next policy meeting on November 2-3, where it could announce its plans to taper its asset purchases.
The gold price could also find support from seasonal factors, such as increased demand for jewelry and gifts during the festive season in India and China. Moreover, some investors may view gold as a hedge against potential market volatility ahead of the US midterm elections in November 2022.
The gold price could face some headwinds from profit-taking, technical corrections and higher interest rates in some major economies. However, these factors are unlikely to reverse the long-term uptrend of the gold price, which is driven by strong fundamentals and sentiment.
The gold price could test new highs above $2,100 per ounce in the near term, according to some analysts. In the longer term, some forecasts suggest that the gold price could reach $3,000 or even $5,000 per ounce in the next decade.
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