After a months-long correction, gold prices appear to be resuming their march towards $5,000 per ounce. On Tuesday (August 25), Bernard Dahdah, a precious metals analyst at Natixis, raised his year-end price forecast for gold, predicting it will reach $5,000 per ounce by the end of the year, up from his previous target of $4,600. This upward revision comes as gold prices are expected to close August with a nearly 15% monthly gain.

Gold prices are on track for their best monthly performance in 25 years.

Spot gold is currently hovering above $4,600 per ounce, and for August as a whole, it is on track for its biggest monthly gain since September 1999. Dahda points out that gold's rally began in early August when disappointing economic data began to force the market to repric its interest rate expectations. Last month, the market priced in at least two rate hikes, but expectations have now shifted, with the market now pricing in a rate cut in December. He adds that gold recently received a second wave of buying support after the U.S. Treasury announced it would double its 10-year and 30-year bond repurchase program to $4 billion, a move that coincided with the U.S. debt surpassing the $40 trillion mark.

The Ministry of Finance's intervention in the bond market and fiscal concerns ignited devaluation trades.

Doherty stated, "The Treasury's intervention stemmed from the 30-year yield hitting a 20-year high of 5.3%. Market concerns lie in the negative impact on mortgage and housing markets if the long end of the yield curve is not contained. Despite the higher opportunity cost of holding gold, the market is worried about the stability of the fiscal and bond markets. The resulting concerns about currency devaluation make gold more attractive." Doherty expects that the escalating sovereign debt concerns that have been pushing up gold prices this month will provide further tailwind support for gold for the remainder of the year. He stated, "The level of US debt is expanding faster than expected. Court rejections of tariffs have deprived the government of a source of revenue; meanwhile, the Pentagon is still seeking to increase spending further. Private sector debt is rising sharply as AI companies seek to expand. Meta, Microsoft, and Amazon have signed nearly $250 billion in power purchase agreements, with approximately $2.4 trillion in committed purchases and investments." In his view, these accumulating fiscal and debt pressures will continue to strengthen gold's safe-haven and value-preserving attributes. He predicts that the average price of gold will reach $5,000 per ounce by 2027. At the same time, he is also bullish on silver, predicting that the average price of silver next year will be around $78 per ounce.

Conclusion

Amid a confluence of factors including a ballooning fiscal deficit, frequent interventions in the bond market, and shifting interest rate expectations, gold is once again on its way to the $5,000 mark. From holding above the key $4,000 support level to the potential for its best monthly performance in 25 years, and with institutions raising their year-end targets, bullish sentiment towards gold is significantly intensifying. However, inflationary pressures and the Federal Reserve's policy direction remain crucial variables influencing gold prices, and whether gold can truly break through the $5,000 barrier before the end of the year remains to be seen. Spot gold monthly chart source: FX678. At 10:10 AM Beijing time on August 26, spot gold was trading at $4659.78 per ounce.