Gold price predictions for next 5 years: Will gold continue rising?

By Capital.com news07:50 (UTC), 17 May 2023 Updated

Gold bars on a black background with a diagram — Will gold rebound above $1,800? – Photo: Olivier Le Moal/Shutterstock

Gold prices reached near-record highs in May, peaking at the $2,067 point, a milestone not achieved since March the previous year. The most recent surge was fuelled by the unsettled negotiations over the US debt ceiling. Janet Yellen, the Treasury Secretary, cautioned that the US economy is in danger of exhausting its cash reserves as soon as the start of June.

Prior to this, the gold prices were buoyed by investor unease stemming from turbulence within the banking sector. This anxiety was primarily incited by the collapse of Silicon Valley Bank and the subsequent acquisition of Credit Suisse by UBS (UBSG), which rattled investor confidence.

Gold’s live price chart

Will the bullish momentum for the yellow metal continue and what’s the long-term outlook? Here we take a look at the gold price predictions for the next 5 years.

Short history of gold

Gold was first discovered by Ancient Egyptians over 4,000 years ago. Throughout centuries the precious metal was used as a store of value and showcase of wealth. In the modern day and age, gold’s demand has expanded to industrial use, most notably in production of electronics.

As with many commodities, gold’s price is highly influenced by the forces of supply and demand. Yet the yellow metal is also seen as an investment asset, preserving value throughout centuries. Some investors believe in its safe-haven quality and use gold to hedge against inflation and economic uncertainty.

Gold is denominated in US dollars, which means the precious metal has an inverse relationship with the greenback. The USD strength against other currencies hurts the price of gold as it becomes more expensive and hence less attractive for overseas buyers. Conversely, when the USD is falling in value, it fuels gold demand.

Gold can be bought as a bullion in its physical form, or traded through financial derivatives. Some investors choose exposure to gold-mining stocks, or gold-linked exchange-traded funds (ETFs).

Gold price regains momentum in 2023

A shift towards bullish momentum was observed in the gold market towards the end of 2022 and into 2023. The precious metal’s price experienced a 14% ascent from November 2022 to the early part of February 2023.

The price rise was underpinned by the less hawkish tone conveyed by Jerome Powell of the US Federal Reserve (Fed). Additionally, the rejuvenation of China's economy, leading to a surge in jewellery demand, lent further support to gold's price at the start of 2023.

Amid the banking sector's disarray following Silicon Valley Bank's downfall in March, gold vaulted over the $2,000 milestone as investors sought refuge in safe-haven assets. The precious metal continued its bullish stride, peaking at an intraday high of $2,067 on 4 May. This was driven by the confluence of US debt ceiling concerns and the Fed’s indications of a halt in the tightening cycle, both of which sparked an upsurge in gold demand.

Gold’s price, 2018 - 2023

Why is gold rising?

In 2023, the received support from the wider the wider economic pessimism and fears of the upcoming recession. Investors tend to hoard during times of uncertainty hoping that the metal will preserve its value.

Currently, the US debt ceiling negotiations and the possibility of a US debt default are the key drivers of anxiety for investors. May 2023 saw a standstill between Democrats and Republicans over the US debt ceiling, with the Treasury Secretary Janet Yellen warning that this impasse could lead to a cash deficit by June.

Michael Pearce, Oxford Economics' Lead US Economist, stressed that this deadlock increases the risk of a damaging default and, even if avoided, likely leads to federal spending cuts that could hurt the economy:

“Negotiations over the debt ceiling kicked into a higher gear, but both sides are still far from an agreement. With the Treasury potentially running out of cash by early June, the chances of a disorderly and damaging default are rising. Even if default is averted, the odds are high that any final deal includes cuts to federal spending, which would weigh on the economy.”

Concurrently, AJ Bell’s Investment Director, Russ Mould, suggested that growing US deficit and debt-ceiling discussions could encourage gold-supporting investors:

“Gold bugs will be on the look-out for any signs of higher spending and higher deficits as justification for their faith in the precious metal as a store of value at a time of fiscal incontinence and after an extended period of money printing.”

Another key driver of safe-haven demand was the banking turmoil triggered by the collapse of Silicon Valley Bank in March 2023, the largest banking failure since the 2008 financial crisis. Further destabilisation came when Credit Suisse admitted substantial weaknesses in its bookkeeping, leading to a $17 billion loss in bonds and a rescue takeover by rival UBS, leading investors to seek refuge in gold.

Yet investors aren't the only ones who see gold as a hedge against economic downturn. Central banks’ demand for the precious metal remained unquenched, contributing an impressive 228 tonnes to global reserves in the first quarter of 2023, according to the World Gold Council, with Singapore, mainland China and Turkey among the biggest buyers.

Plus, the weakening of the US dollar and the perceived slowing of the Fed’s rate hikes is supporting the USD-denominated gold. The Fed raised the federal fund rate by 25 basis points (bps) at the May meeting, and signalled that a hike pause is likely, indicating a more dovish stance.

Gold price predictions for the next 5 years: Long-term gold outlook

After the banking turmoil in March, Fitch Solutions revised their expected gold price to average $1,950 per ounce in 2023. The agency explained:

“March 2023 banking turmoil has triggered a rush to safety among investors fearing recession while market expectations for continued and aggressive rate hikes by the US Fed have now collapsed.”

In its gold price projection on 24 April ABN-Amro Group estimated the precious metal to average at $1,900/oz in 2023 and rise to $1,950 by the end of 2024.

Meanwhile, ANZ Research analysts revised upwards their gold price predictions on 13 May, pointing to the turbulence in the US banking sector, elevated interest rates, and ambiguity concerning the debt ceiling as key factors spurring the appeal of gold as a safe haven.

The firm also highlighted the substantial gold acquisitions by central banks, and forecasted an uptick in gold purchases in India during the Monsoon season in the latter half of the year.

Based on these factors, ANZ Research projected gold to be trading at around $2,100 by the close of 2023, accelerating to $2,200 by September 2024. ANZ Research didn’t provide a gold price forecast for the next 5 years.

The World Bank’s long-term gold price forecast as of April 2023 expected gold prices to finish 2023 at $1,900, falling to $1,750 by the end of 2024.

Meanwhile, algorithm-based price forecasting service WalletInvestor was bullish in their gold rate prediction for the next 5 years as of 16 May. The website saw the metal rising to $2,289 by May 2028. WalletInvestor’s projected gold price to trade at $2,090 in one year’s time.

Final thoughts

Note that analysts’ and algorithm-based outlook for the gold price in the next 5 years can be wrong and shouldn’t be used as a substitute for your own research. Commodity markets remain volatile and shaped by the constant flux of economic and geopolitical events.

It’s essential to always perform your own due diligence before trading, looking at the latest news, a wide range of commentary, technical and fundamental analysis.

Note that past performance does not guarantee future returns, and never trade more money you can afford to lose.

FAQs

What affects gold price?

Gold prices are driven by a number of factors including the strength of the US dollar, physical and investment demand for the precious metal, and the health of the global economy. Gold is seen as a safe-haven asset, which rises during times of economic uncertainty, and is used by some investors as a hedge against inflation.

How much has the gold price increased per year?

In 2022, the price of gold stayed flat, increasing only slightly by 2%.

What will the price of gold be in 5 years?

The gold price forecast for the next 5 years will depend on a blend of factors, including the trajectory of the US dollar, the ramifications of monetary tightening on the global economic landscape, unfolding events in the banking sector, and notably, the evolving concerns around the US debt ceiling. Keep in mind that analysts can and do get their predictions wrong. You should do your own research to make informed trading decisions, always bearing in mind that past performance is no guarantee of future returns.