UAE: Gold prices may hit $3,500 due to central bank purchases
The precious metal was trading at $3,356/77 per ounce on Monday afternoon, down 1.29 per cent. In Dubai, 24K and 22K were trading at Dh406.75 and Dh376.75 per gram, respectively.
'We expect gold to reach $3,500 in six to 12 months. The main driver of our view remains central bank purchases — while these have slowed for now after the last surge in prices, we believe central bank reserve diversification into gold is not yet complete. In the meantime, though, likely lower US interest rates are likely to be another source of support, as well as safe haven demand during bouts of volatility,' said Manpreet Gill, chief investment officer of Africa, Middle East and Europe at Standard Chartered.
'Central bank demand is expected to result in another leg higher in prices after a period of consolidation. It also plays a key portfolio diversifier role when bonds do not,' said the global bank in its global market outlook.
According to a World Gold Council survey, 76 per cent of global central banks surveyed believe that gold will comprise a higher share of global reserves five years from now, up from 69 per cent in last year's survey. Gold now accounts for an estimated 18 per cent of global reserves, up from 11 per cent in 2018.
'If there's a winner from the de-dollarisation push, it's gold. Central banks, especially in emerging markets, have ramped up gold purchases. The People's Bank of China, for instance, resumed gold buying in 2022 after a three-year pause,' the bank said.
'Part hedge, part symbol, gold's appeal is clear in a world of rising inflation, geopolitical friction and currency uncertainty,' it said.
The global bank projected that the yellow metal has limited near-term upside if Middle East tensions stay contained, but remains a key strategic hedge. 'We raise our three-month price expectation to $3,400, but leave our 12-month expectation unchanged at USD 3,500,' it added.
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