HSBC Raises Average Gold Price Forecasts

HSBC has raised its average gold price forecasts in response to various factors including geopolitical risks, expectations of ongoing monetary easing, and fiscal imbalances. The bank noted that gold prices reached a record high of $2,865 per ounce in late September, driven by heightened demand for safe-haven assets and increased hedge fund activity.

For 2024, HSBC adjusted its average gold price forecast to $2,395 per ounce, an increase from the previous estimate of $2,305. The bank also significantly raised its 2025 forecast from $2,105 to $2,625 per ounce, and revised its 2026 projection from $2,025 to $2,515. Additionally, the long-term forecast was increased to $2,200 per ounce, up from $2,000.

Key drivers behind HSBC’s optimistic outlook include ongoing geopolitical tensions, especially in the Middle East, and persistent economic uncertainty, which has heightened the appeal of gold as a safe-haven investment. The bank also pointed to increasing fiscal deficits as a contributing factor to gold demand. However, HSBC warned that as the cycle of monetary policy easing continues, further interest rate cuts may offer decreasing support for gold prices.

While exchange-traded funds (ETFs) are continuing to reduce their positions, demand from over-the-counter (OTC) buyers and real money purchases remains strong. Analysts observed that long positions on the CME are high but may not see significant growth in the near future. Sentiment in the market appears bullish, although there are indications that the current rally could be becoming overstretched.

HSBC highlighted that central banks continue to be significant purchasers of gold, though their buying has slowed compared to previous years. The prospect of further rate cuts from the U.S. Federal Reserve, along with rising concerns over fiscal deficits in major economies, enhances gold’s position as a hedge against financial and economic risk.

Nonetheless, the bank cautioned that the rally might encounter challenges. A stronger U.S. dollar, influenced by relative economic performance and potential rate cuts in other countries, could restrict gold’s upward movement. Furthermore, while central bank demand remains strong, it is anticipated to stabilize unless a substantial price correction occurs.

Looking forward, HSBC projects gold prices to fluctuate between $2,350 and $2,950 per ounce through 2025, with year-end targets of $2,725 for 2024 and $2,575 for 2025.