JPMorgan expert explains why gold prices could fluctuate wildly

Gold is stored at a bank in Frankfurt, Germany. Photo: AFP/TTXVN

According to Fortune (USA) on May 10, gold has shined in recent years, especially after President Donald Trump entered a new term and "ignited" the trade war.

However, analysts at JPMorgan predict gold could reach astronomical prices by the end of the decade if foreign investors show signs of a slight shift away from US assets.

In a May 7 assessment, analysts at JPMorgan presented a scenario where gold prices could hit $6,000 an ounce by 2029 – an 80% increase from the current price of around $3,300.

They believe that if just 0.5% of the assets that foreign investors are pouring into the US were converted into gold, the annual return could be up to 18%, causing the price of this precious metal to skyrocket to the $6,000 mark.

This is because the current supply of gold is not increasing significantly, so even a small boost in demand can cause prices to fluctuate dramatically.

“While hypothetical, this scenario explains why we remain long-term bullish on gold and believe there is still room for price growth,” JPMorgan analysts noted. Gold has gained more than 20% year-to-date and is now at double the price it was three years ago.

After the Russia-Ukraine conflict broke out in 2022, leading to a series of financial sanctions that froze Moscow's USD and euro assets, many central banks around the world began to buy gold en masse, fearing that their reserves could also be threatened in the future.

High inflation and a worsening budget deficit are also factors that have made gold prices rise more strongly. The re-election of Donald Trump as US President has further accelerated this trend.

Not only that, JPMorgan commented that the statement from President Trump's administration that other countries are benefiting from the USD being the global reserve currency and should "share the burden" also made foreign investors more cautious.

“Recent developments in financial markets indicate a shaken confidence in US assets and Washington is facing the risk of capital flight,” analysts warned.

Trump’s tough trade statements since taking office in January have roiled macro markets, causing the dollar to lose its traditional role as a “safe haven” and forcing investors to look for assets elsewhere. According to AFP (France), the US has long been considered a financial safe haven. The recent sell-off of the dollar, stocks and treasury bonds due to panic over President Donald Trump’s trade war has led many to wonder whether that is still true as before.

JPMorgan estimates that if just 0.5% of total foreign assets held in the US were converted to gold, it would be equivalent to a $273.6 billion inflow into the precious metal over four years – equivalent to about 2,500 tonnes of gold.

Although this represents only about 3% of the total gold currently held globally, “the additional demand on a quarterly basis is huge.”

This scenario further reinforces the already high gold price outlook. Last month, JPMorgan predicted that gold prices would reach $3,675 an ounce in the fourth quarter of this year, and surpass $4,000 by the second quarter of 2026, representing a gain of about 20% from current levels.

In April, Goldman Sachs raised its year-end gold price forecast to $3,700 an ounce (from $3,300 previously), and said that gold could even approach $4,500 even in extreme scenarios.

According to Baotintuc.vn

Source: https://baohoabinh.com.vn/12/201001/JPMorgan-expert-why-gold-prices-can-change-manh.htm