Is gold heading towards $6,000? Analysts weigh in on why you should be prepared

Gold prices have been on a tear and according to JPMorgan analysts, the run may be a long way from over, as per a report. The bank's most recent research note revealed that gold could rise to $6,000 per ounce by 2029, according to Fortune.

Gold’s Rally Isn’t Over Yet

That is an 80% increase from the current price of about $3,300. According to JP Morgan's estimation, even if just 0.5% of foreign-held US assets are reallocated to gold, that would lead to 18% annual returns and eventually send prices to $6,000, reported Fortune.

The reason for this is that the supply of gold isn't expanding by much, so even a modest rise in demand can lead to a big price swing, according to Fortune.


JP Morgan analysts wrote that, "While hypothetical, this scenario illustrates why we remain structurally bullish gold and think prices have further to run," as quoted by Fortune.

What Sparked This Trend?

Gold has risen over 20% this year until now, sustaining a strong rally that's doubled its price in three years, as per the report.

A massive change began in 2022, when Russia invaded Ukraine and caused stringent financial sanctions, as per the report. Western nations froze Moscow's dollar and euro reserves, issuing a warning to other central banks: their own foreign currency holdings might be at risk, according to Fortune. In response, they bought gold as a more secure store of value.

That trend has only gained momentum, driven by high inflation, and increasing government deficits and when US president Donald Trump returned to the White House, gold's rally further accelerated, reported Fortune. His trade war has put pressure on US financial markets, and his public battles with Federal Reserve Chair Jerome Powell have created uncertainty, according to the report.

JP Morgan analysts have warned saying, "The recent period in financial markets has demonstrated that interest and trust in US assets are already being questioned, and the US is vulnerable to capital outflows," quoted Fortune.

Potential Gold Demand Explosion

The bank calculated that if foreign owners shifted just 0.5% of their US holdings into gold, it would pump about $273.6 billion into the gold market in four years, that's about 2,500 metric tons, as per the report. While, it is just about 3% of the world's total gold holdings, but analysts say it would still produce a huge surge in demand quarter to quarter, according to Fortune.

FAQs

Why is gold going up so much?
Gold is rising because of global uncertainty, inflation, and concerns about US financial stability.

How high could gold hit?
JPMorgan predicts gold could hit $6,000 per ounce by 2029, as per Fortune.