HSBC raises its average gold price forecast via Investing.com

Investing.com — HSBC raised its average gold price forecast on Tuesday, a move driven by a combination of geopolitical risks, expectations of continued monetary easing and fiscal imbalances.

The bank points out that gold prices rose to a record high of $2,865 an ounce at the end of September, fueled by increased safe-haven demand and hedge fund activity. In response to this increase, HSBC has adjusted its average price forecasts upwards in several time frames.

For 2024, HSBC raised its average forecast to $2,395 an ounce, up from $2,305 previously.

The bank also significantly adjusted its forecast for 2025, raising it from $2,105 to $2,625 an ounce. For 2026, the forecast moved from $2,025 to $2,515 per ounce, while the long-term outlook was raised to $2,200 per ounce, up from $2,000.

Key factors influencing HSBC’s bullish outlook include persistent geopolitical tensions, particularly in the Middle East, and continued economic uncertainty, which has fueled demand for gold as a safe-haven asset.

Rising fiscal deficits are also boosting demand for gold, notes HSBC. However, as the cycle of monetary policy easing continues, further interest rate cuts “may be progressively less favorable,” the bank’s analysts said in a note.

Meanwhile, exchange-traded funds (ETFs) continue to liquidate positions, although over-the-counter (OTC) and real-money buying remains robust.

“CME long positions are high, but may not rise much further,” the note added. “Sentiment appears bullish, and while the near-term upward trajectory shows no sign of abating, the rally may become overdone.”

HSBC also points out that central banks continue to be the main buyers of gold, although purchases have moderated from 2022 and 2023 levels. The potential for further US Federal Reserve interest rate cuts combined with concerns about fiscal deficits from major economies also contributed to gold’s appeal as a hedge against monetary and economic risks.

However, HSBC also noted that the rally could face some headwinds. A firmer US dollar, driven by the relative strength of the economy and possible interest rate cuts in other economies, could limit gold’s gains. Moreover, while central bank demand remains strong, it is expected to level off unless there is a significant price correction.

Looking ahead, HSBC expects gold to trade in a broad range of $2,350 to $2,950 an ounce through 2025, with year-end targets of $2,725 for 2024 and $2,575 for 2025.