Gold price tipped to rise further and break records

With interest rates on the rise and the global economy teetering on the edge of recession, the yellow metal has rarely been so popular. Here are City targets for gold and stocks that benefit.

Gold’s value in times of market uncertainty continues to boost London stocks including Endeavour Mining (LSE:EDV) as the price of the precious metal today topped $2,000 an ounce.

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FTSE 100-listed Endeavour, which has assets in Senegal, Côte d’Ivoire and Burkina Faso, has risen by 20% over the past month as the banking crisis and recent signs of weakness in the US economy help push gold nearer its August 2020 record of around $2,075.

Past performance is not a guide to future performance.

Peru’s Hochschild Mining (LSE:HOC) and Egypt-based Centamin (LSE:CEY) also saw heavy buying today, rising 2.6p to 86.7p and 3.8p to 108.1p respectively after the weakest figure for US job openings in almost two years led to a 1.9% spike in the gold price on Tuesday afternoon.

On AIM, East Africa’s Shanta Gold Ltd (LSE:SHG) rose 0.45p to 12.25p, Brazil-focused Serabi Gold (LSE:SRB) by 3.5p to 33p, while Guinea and Mali-based Hummingbird Resources (LSE:HUM) jumped 2p to 10.5p.

The rally for stocks comes as physically-backed gold exchange-traded funds (ETFs) are expected to have seen net inflows in March for the first time in almost a year.

UBS Global Wealth Management now believes there’s a chance that gold prices will reach its end-March 2024 target of $2,100 an ounce earlier than expected.

It said last week: “While a repeat of the global financial crisis appears to have been averted, we think it will take time for investor confidence to be fully restored.”

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The usual hedge against high inflation and geopolitical uncertainty has been one factor for gold’s performance, but a further upside has emerged recently amid signs that the Federal Reserve is close to calling a halt to interest rate hikes.

Further evidence that the US economy is cooling came with this week’s decline in factory orders for February as the impact of higher interest rates begins to be felt.

Additional signs of labour market weakness in Friday’s closely-watched non-farm payrolls have the potential to drive US bond yields lower and lift gold into record territory.

Gold is sensitive to the monetary policy outlook as higher rates dent the appeal of holding non-yielding bullion, although this relationship has been tested in recent years.

In the past, every 100 basis point increase in US 10-year real yields would have typically resulted in gold falling in the range of 14% to 20%. Yet last year, gold fell by much less than this to around $1,600 an ounce despite a significant rise in yields.

Bank of America today lifted its fourth-quarter gold price forecast from $2,000 to $2,200 an ounce as the end of the rate-hiking cycle looks set to bring more investors to the market.