Gold investors anticipate record high prices next year, when the fundamentals of a dovish pivot in US interest rates, continued geopolitical risk and central bank purchases should support the market after a volatile 2023.
Spot gold is on track to record an annual increase of 13 per cent in 2023, its best year since 2020, trading around $2,060 per ounce.
“On the back of a surprisingly robust performance in 2023, we see further price gains in 2024, driven by a trifecta of momentum seeking hedge funds, central banks continuing to buy physical gold at a steady pace and, not least, renewed investor demand for ETFs,” Saxo Bank’s Ole Hansen said.
On 4 December, gold hit a record high of $2,135.40 on bets of US monetary policy easing in early 2024 after an apparent dovish tilt by Federal Reserve Chairman Jerome Powell, surpassing the previous record reached in 2020.
The precious metal almost reached uncharted territory in May this year when a regional banking crisis in the US took hold. By October, it had retreated to close to 1,800 dollars an ounce, until the demand for refuge triggered by the Israel-Hamas conflict spurred another recovery.
Investors returned to the popular SPDR Gold Shares exchange-traded fund, which recorded net inflows of more than a billion dollars in November.
A Reuters poll conducted in October predicted that prices will average $1,986.50 in 2024. They are averaging over $1,950 so far this year, higher than any previous annual average price.
JP Morgan sees “an intense recovery” for gold in mid-2024, with a predicted peak of $2,300 due to expected rate cuts. UBS predicts a record high of $2,150 by the end of 2024 if the cuts materialise.
The World Gold Council, in its outlook for 2024, projected that a drop of around 40 to 50 basis points in yields with longer maturities, after 75-100 points of rate cuts, could translate into a 4 per cent gain for gold.
Inflation risks
Conflict in the Middle East, the uncertainty of elections in major economies and central bank purchases led by China will also increase gold’s appeal as a safe haven next year, analysts predicted.
But “gold could be forced to reverse some of this year’s gains if resurgent inflation forces the Fed to abandon plans for a policy change in 2024,” said Han Tan, chief market analyst at Exinity.
Inflation cooling faster than the Fed cuts rates could also slow the economy and hurt retail purchases.
Heraeus Metals expects higher demand for gold jewellery from China’s top consumers this year, with further support possible in 2024 through stimulus measures.
On the other hand, silver is expected to fall by 1 per cent in 2023, trading at just under $24 an ounce. It will trend towards $26 an ounce next year, benefiting from improved industrial demand, according to TD Securities.
On course to fall by 6 per cent in 2023, platinum will maintain a range between $800 and $1,100 an ounce in 2024, estimates Heraeus.
The impact of the energy transition was demonstrated with automotive catalyst-dependent palladium falling by more than a third this year, the market’s worst performance since 2008.
Palladium, which fell below $1,000 an ounce in November – for the first time in five years – before recovering, faces surpluses as electric vehicles become more popular.
Bank of America expects palladium to average $750 per ounce by 2024, subject to any major cuts in supply.
O Económico
