A combination of factors including expectations of further rate-cuts in the United States and uncertain geopolitical conditions could cause a price spiral in gold, analysts have said. According to a London-based mining analyst at Global Equity Research, the yellow metal's price could go past US$1,600 an ounce.
On Wednesday, spot gold rose to $1,510.50 per ounce while US gold futures gained 0.8 percent to hit to $1,516.20 per ounce. Rising concerns over the health of the global economy have prompted investors to lap up the bullion, which is seen as a safe asset during times of turmoil. Apart from the China-US trade war and Brexit fears, factors such as the US Federal Reserve's dovish stance and rising gloom in global economy are also supporting a nascent gold rally.
"Most central banks have been cutting rates in the last six months to pre-empt a slowdown. As a result, gold prices have gone up by some 20 per cent. An increase of between 5 and 7 per cent from hereon wouldn't be a difficult bridge to cross," analyst Venkat Ramana Nandyal said, according to the Business Times.
Gold touched its record price during the 2011-12 rally, when prices hit $1,921.17 an ounce.
Gold prices hit a six-year high in September after global central banks eased policy in the backdrop of a widespread slowdown in growth and rising fears of a trade war.
Also in September, Citigroup said gold prices could rally to an astounding price of above $2,000 an ounce in the next two years. "We expect spot gold prices to trade stronger for longer, possibly breaching $2,000 an ounce and posting new cyclical highs at some point in the next year or two," Citigroup analysts said in a note on Sept. 10.
"For now, the U.S. consumer and potential growth story is holding up ... we remain more concerned about market signals -- three-month to 10-year yield curve inversion -- and leading indicators that are weakening at the fastest pace since the Great Recession," the note added.
