The gold price has shifted higher in 2024, nudging a new all-time high of US$2,474.5 per ounce this week. It has since pared back from that level and is trading at US$2,429 per ounce at the time of writing.
ASX gold shares are under pressure today, alongside the whole ASX market. At the time of writing, the basket of gold majors was down across the board:
- The Bellevue Gold Ltd (ASX: BGL) share price is down 1.3%,
- Shares in Evolution Mining Ltd (ASX: EVN) are down 3.9%,
- The Newmont Corporation (ASX: NEM) share price is down 2.8%,
- The Northern Star Resources Ltd (ASX: NST) share price is down 1.8%,
- The Ramelius Resources Ltd (ASX: RMS) share price is down 2.9%, and
- Shares in Regis Resources Ltd (ASX: RRL) are down 2.3%.
Despite the sea of red today, Morgan Stanley has a bullish outlook on gold prices. And it's not alone.
Here's what the experts are saying.
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Morgan Stanley's bullish gold price forecast
Morgan Stanley's commodity strategist Amy Gower suggested that gold was "starting to find momentum" after hitting this week's record high.
She highlighted in The Australian that while physical demand for gold was slowing, financial flows were expected to drive the next leg higher,
The broker has set a gold price target of US$2,650 for the December quarter. At the current AUD/USD exchange rate, this equals roughly A$3,950 per ounce. Gower explains:
Continued volatility is likely as incoming US data influences expectations on rate cut timing, but we think the broad direction for gold should be higher.
Grover also pointed out that gold ETFs have seen inflows since late May, primarily from Europe after the European Central Bank (ECB)'s interest rate cuts.
Inflows could also be impacted by an interest rate cut in the United States, the broker said.
While US recession fears are rising, our economists still see a soft landing with a stronger Fed reaction if the data turns weaker, either of which should support investor gold inflows.
The broker isn't alone
It's not just those at Morgan Stanley that see an upward trend for the gold price.
Shaw and Partners brokerage also forecasts a bullish trend, predicting gold could top US$3,000/ounce by 2025.
At the current AUD/USD exchange rate, this equals A$4,478 per ounce. This is another 23% upside on today's price in Australian dollars.
The broker attributes this to several factors, including lower interest rates, elevated US debt levels, central bank purchases, and geopolitical tensions, according to the Australian Financial Review.
Shaw named four key factors that could push the gold price another 20% higher by 2025, mostly centred around the US. They included (per the AFR):
US monetary policy: Lower interest rates reduce the yields on fixed-income assets such as government bonds, "resulting in increased demand for alternative 'safe' investments like gold".
US debt levels: Elevated levels of US federal debt could weaken investor confidence in the economy. Again, this could spur a safe-haven demand for gold. Shaw notes that around 30% of the US's total debt of US$34 trillion is set to mature this year. "Currently, there is no unified view from Congress on how to tackle this…" it says.
De-dollarisation: While this isn't a new term, it refers to the US dollar's status as the world's reserve currency. Shaw notes that historic levels of gold have been bought by global central banks since 2022, with China being the leading purchaser. Many commentators speculate this signals a move towards de-dollarisation, which could be good for the gold price.
Geopolitical risks: Again, noting its safe haven status, tensions in Europe and the Middle East could potentially be another tailwind for gold. "Gold is viewed by investors as a physical, relatively scarce asset that has historically held its value," the broker said.
Golden takeout
The bullish sentiment from Morgan Stanley and Shaw and Partners, along with potential interest rate cuts and ongoing geopolitical tensions, supports a positive long-term outlook for gold prices.
However, investors should always consider the short-term volatility and current performance of ASX gold shares.
