Gold to enter 2024 with sights set on record highs

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Gold to enter 2024 with sights set on record highs

Investors expect gold prices to reach all-time highs next year. This is because a dovish turn in US interest rates, ongoing global risk, and central bank buying are expected to support the market after a rough 2023.

Spot gold rose 13% yearly in 2023, which was its best year since 2020. It was selling at $2,062.9 an ounce.

“Following on from a surprisingly robust performance in 2023 we see further price gains in 2024, driven by a trifecta of momentum chasing hedge funds, central banks continuing to buy physical gold at a firm pace, and not least renewed demand from ETF investors,” Ole Hansen from Saxo Bank said.

Gold prices hit a record high of $2,135.40 on December 4 on bets that US monetary policy would ease in early 2024 after what was seen as a “dovish tilt” from Federal Reserve Chair Jerome Powell. This broke the previous record set in 2020.

The price of the precious metal almost reached uncharted ground in May of this year, when there was a crisis in several US banks. By October, it had dropped close to $1,800 an ounce until the war between Israel and Hamas caused demand for safe haven assets, which led to another rally.

People put their money back into the well-known SPDR Gold Shares exchange-traded fund, which saw net returns of over $1 billion in November.

A study done by Reuters in October said that the average price of gold in 2024 would be $1,986.50. They have cost more than $1,950 on average so far this year, which is more than any other year’s average price.

Gold will likely see “a breakout rally” in the middle of 2024, with a goal high point of $2,300 due to expected rate cuts. UBS predicts a new high of $2,150 by the end of 2024 if the cuts happen.

In its 2024 prediction, the World Gold Council said that a drop of 40 to 50 basis points in longer-term yields, coming after rate cuts of 75 to 100 basis points, could lead to a 4% rise in gold prices.

RISKS OF INFLATION

Analysts think that next year will see a rise in demand for safe-haven bullion due to the war in the Middle East, the uncertainty caused by elections in major economies, and purchases by central banks led by China.

But, “gold might have to give up some of its gains this year if inflation rises and the Fed has to scrap its plans for a policy shift in 2024,” said Han Tan, chief market expert at Exinity.

It’s possible that the economy will slow down and people will buy less if inflation falls faster than the Fed lowers rates.

Heraeus Metals thinks that China, which is one of the biggest gold consumers, will buy more gold jewellery this year. In 2024, stimulus steps could help even more.

Silver, on the other hand, dropped 1% and was worth just under $24 an ounce in 2023. TD Securities says it will move towards $26 an ounce next year, thanks to better demand from industry.

Shea says that platinum will stay between $800 and $1,100 an ounce in 2024, after a 6pc drop in 2023.

This year, the price of autocatalyst-dependent palladium dropped by more than a third, which was the worst performance on the market since 2008. This showed how the energy shift affected the market.

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