Gold price forecast: Here’s why it will soar to a new record high

Gold price has moved sideways in the past few days as investors assess the impact of last week’s interest rate decision by the Federal Reserve. After soaring to a record high of $2,082 in April, the metal dropped to $1,960. The metal has soared by more than 20% from the lowest level in 2022.

The bullish case for gold

There are two main reasons why gold prices could continue rising in the next few months. First, the Federal Reserve has likely ended its hiking cycle. As we wrote here, the bank decided to leave interest rates unchanged last week. It warned that it will likely resume the hiking cycle later this year.

However, there is a likelihood that the bank will not hike again since inflation is falling. Data published last week showed that the headline consumer price index (CPI) dropped to 4.0% in May. If the trend continues, inflation will likely move to the Fed’s target in the fourth quarter of this year or in Q1 of next year.

Second, there are concerns about the US debt situation. The most recent data shows that America’s public debt jumped to over $32 trillion. And the recent debt ceiling deal guaranteed that the debt will hit over $36 trillion in the next few years. 

A debt crisis is not expected to happen any time soon. However, in the future, there is a possibility that America’s creditors will demand higher interest rates. In all this, gold will be a good safe haven for investors.

Third, as we have written before, de-dollarisation is going on as countries diversify their reserves. Countries like Russia, China, India, and Turkey have continued accumulating gold reserves. As the distrust for the US dollar continues, there is a likelihood that gold will see more demand.

At the same time, gold production is not growing as fast as demand. Supply jumped by just 1% in the first quarter as demand remained elevated.

Gold price technical analysis

The other bullish case for gold prices is technicals. The chart above shows that gold price formed a cup and handle pattern that is shown in purple. It is now forming the handle section of this pattern. Further, gold is stuck above the 100-day moving average. Gold has also moved slightly below the key support at $1,960, the highest point in February this year.

Therefore, there is a likelihood that gold price will bounce back in the coming months. More upside will be confirmed if the price moves above the important resistance level at $2,000.

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