QNB Expects Gold To Keep Rising Medium-Term

Doha: QNB expects gold prices to continue rising in the medium term, driven by several key factors, particularly after the substantial gains it has seen in recent months.

In its weekly report, the bank said that this trend is supported by strong momentum across a range of macroeconomic indicators and long-term geopolitical developments.

It pointed out that central banks are rebalancing their reserves and currency volatility is increasing, both of which support gold demand.

The report emphasized that gold holds a unique place in today's investment landscape. Although it doesn't generate income, involves storage costs, and has limited industrial use, it remains highly favored by households, sovereign institutions, and investors.

QNB noted that while gold has historically been a pillar of monetary stability, it has more recently taken on the role of a risk mitigator. Its appeal has been driven by the idea that it helps diversify portfolios and serves as a hedge against inflation, financial crises, and geopolitical turmoil.

The report stressed gold's resilience in the face of economic shocks, such as the 2008-2009 global financial crisis and the COVID-19 pandemic, underscoring its value as a hedge against systemic risk and macroeconomic instability.

The report explained that gold prices have climbed significantly in recent years, with the pace of increase accelerating in recent months. It mentioned that, before the latest pullback, gold had surged to $3,500 per ounce, reaching record highs for several months.

It went on to say that, after this steep rise, 114% since the COVID pandemic and 92% since the onset of the Russia-Ukraine war, it's only natural that analysts and investors would start asking whether prices can climb even higher in the years ahead.

QNB highlighted that gold has outperformed all major asset classes, challenging the common belief that it only performs well in times of crisis. This continued strong performance suggests that gold can deliver substantial returns even under a variety of macroeconomic conditions.

According to the bank, two main factors could drive further gains in gold prices over the medium term. First is the increasing attractiveness of gold in a world shaped by long-term geopolitical shifts: growing economic rivalry between East and West, declining international cooperation, rising trade disputes, deepening political polarization, and the use of economic tools like sanctions as weapons.

QNB warned that these dynamics could intensify due to the Russia-Ukraine conflict and ongoing global trade tensions, especially following new US tariffs on imports from multiple countries.

The report also pointed out that in an era of increasing global uncertainty, gold's status as a tangible, legally neutral asset that can serve as collateral across markets has become more valuable. As a result, central banks around the world have been stockpiling gold at a rate not seen in centuries.

While major developed economies typically hold about 25% of their foreign exchange reserves in gold, central banks in emerging markets hold less than 8%.

Given that emerging market central banks collectively hold around $6 trillion in foreign reserves, QNB believes there's significant room for these institutions to keep rebalancing their portfolios toward gold over several years, sustaining long-term institutional demand.

The second key factor is currency movement. Historically, gold has had a strong inverse relationship with the US dollar: when the dollar weakens, gold tends to rise, and when the dollar strengthens, gold often declines. So far this year, the US dollar has fallen more than 6.9% against a basket of major currencies.

Despite that drop, currency valuations still indicate the dollar is overvalued by more than 15%, suggesting further declines may be ahead. If the dollar continues to weaken, this would likely support gold prices by increasing global purchasing power for dollar-denominated commodities like gold.

Additionally, as investors seek to protect themselves from the erosion of purchasing power linked to a weaker dollar, they often turn to gold as a store of value. Consequently, falling dollar value tends to boost demand for gold and adds momentum to rising prices.

MENAFN07062025000063011010ID1109647859