In the absence of a convincing explanation for the Gold price surge, we are sceptical that the precious metal will be able to sustain its gains in the short term. In particular, if expectations of a US rate cut are dampened – for example by another strong US inflation reading today – this could prompt many investors to take profits, leading to a downward correction.

However, we do not expect Gold to fall back to late February levels on a sustained basis. This is because we had anyway expected Gold to rise in the medium term in the wake of the turnaround in US interest rates, which we believe will take place in June. This has probably been largely priced in by now and the move has turned out to be stronger than we expected. 

However, as we – unlike the market – do not expect a pronounced cycle of interest rate cuts in the US, given persistent inflation risks, we believe that the further upside potential for Gold is limited in the medium to long term. We are therefore ‘only’ raising our Gold price forecast for the end of this year and the end of next year from $2,100 to $2,200.