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.
According to Qatar News Agency, in its weekly report, the bank indicated that this trend is supported by strong momentum across a range of macroeconomic indicators and long-term geopolitical developments. Central banks are rebalancing their reserves, and currency volatility is increasing, both of which support gold demand.
The report highlighted gold's unique position in the investment landscape. While it does not generate income, involves storage costs, and has limited industrial use, it remains highly favored by households, sovereign institutions, and investors. Gold, historically a pillar of monetary stability, has recently taken on the role of a risk mitigator, helping diversify portfolios and serving as a hedge against inflation, financial crises, and geopolitical turmoil.
The report also discussed gold's resilience during 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. Gold prices have climbed significantly in recent years, with the pace of increase accelerating in recent months. Before the latest pullback, gold surged to $3,500 per ounce, reaching record highs for several months.
The bank noted that gold has outperformed all major asset classes, challenging the belief that it only performs well in times of crisis. This continued strong performance suggests that gold can deliver substantial returns under various macroeconomic conditions.
QNB identified two main factors that could drive further gains in gold prices over the medium term. The first is the increasing attractiveness of gold amid long-term geopolitical shifts, such as 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. 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 emphasized 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 worldwide 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%. With emerging market central banks collectively holding around $6 trillion in foreign reserves, QNB sees significant room for these institutions to continue rebalancing their portfolios toward gold over the coming 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.