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Anticipations are mounting for gold prices to surge to unprecedented levels in 2024, driven by the influence of decreasing interest rates and growing concerns about an impending recession. These factors further enhance gold’s stature as a secure haven for investors. Historical data from Refinitiv reveals that spot gold prices reached an all-time intraday peak of $2,072.5 on August 7, 2020. Experts interviewed by CNBC express the belief that not only could this level be surpassed, but gold prices might even exceed this record threshold in the near future.
Anticipating the future movement of gold, Bart Melek, TD Securities’ Managing Director and Global Head of Commodity Strategy, foresees a climb above $2,100 around late 2023 to early 2024. He bases his optimism on the potential pause in the U.S. Federal Reserve’s tightening cycle. Melek holds a positive outlook for gold, citing his belief that the Federal Reserve will shift its policy away from the current restrictive stance before the 2% inflation target is achieved. He communicated his perspective to CNBC through an email. The current trading price for spot gold stands at $1,912.26 per ounce.
Initiating a series of consistent interest rate increases in March 2022, the Federal Reserve responded to a 40-year high in inflation. Within a span of less than two years, borrowing costs have ascended to a range between 5.25% to 5.5%. In a recent report, Bart Melek pointed out that over the past year, gold has showcased better performance compared to many significant asset categories. This, he noted, can be attributed to gold’s capacity to withstand the surge in interest rates and its reputation as a secure hedge against inflation.
Certain analysts exhibit a notably optimistic outlook regarding gold, advocating for a projected target of $2,500 by the conclusion of the following year. This forecast surpasses current levels by over 26%. David Neuhauser, Livermore Partners’ founder, articulated his viewpoint, stating, “My forecast entails reaching $2,500 by the conclusion of 2024… A significant portion of this projection is influenced by the potential onset of recessionary influences, which could emerge later this year and gather momentum throughout 2024.” Neuhauser emphasized that he envisions 2024 as the juncture when gold will experience a breakthrough, attaining new pinnacles and even surpassing them. He anticipates that stagflation will persist in the global economy for the upcoming years, accompanied by inflation ranging between 3% to 5%.
During times of economic uncertainty like recessions and stagflation, gold historically displays strong performance owing to its recognized position as a dependable store of value. It frequently functions as a safeguard against inflation. “I’m quite confident that within a span of a few years, we will observe gold reaching $2,500,” affirmed Randy Smallwood, CEO of Wheaton Precious Metals. He further remarked, “Any indication of a recessionary trend would be favorable for gold,” underscoring his observations of economic vulnerabilities in both the Chinese and U.S. economies.
UOB’s projections align with the expectation of gold prices reaching new milestones, albeit in the latter part of 2024. Heng Koon How, the Head of Markets Strategy, Global Economics, and Markets Research at the bank, highlighted that their optimistic perspective for gold hinges on two factors: the predicted culmination of the Fed’s rate hiking cycle and the imminent tapering of the US Dollar’s strength. As per his email communication, Heng noted, “Gold is poised to gain traction when interest rates plateau and the strength of the U.S. dollar subsides.”
Heng’s projection points to gold reaching $2,100 per ounce in the second quarter of 2024. Historically, gold prices exhibit an inverse correlation with interest rates. A surge in interest rates tends to lead to reduced demand for gold as alternative investment options like bonds gain attractiveness, yielding superior returns. In June, U.S. inflation experienced its lowest annual rate in over two years, registering a mere 0.2% increase on a monthly basis. In July, the Federal Reserve approved a long-anticipated interest rate hike, propelling benchmark borrowing costs to levels not observed in more than 22 years.
Heng emphasized the enduring vigor in central bank acquisitions of gold, complemented by robust consumer interest in this precious metal. He highlighted, “We’re witnessing continued substantial purchases by central banks, coupled with sustained consumer appetite for gold.” Furthermore, Heng underlined the revival of physical gold jewelry demand in China and India, attributed to the stabilization of both economies and the resurgence of retail spending.
According to a July report by Citi, the demand for retail gold in China remains robust in 2023, even as consumption of other commodities remains lackluster. The report’s analysts, led by Citi’s Head of Commodities Strategy Aakash Doshi, noted that gold jewelry demand during the first quarter in China was just shy of 200 tons, marking the most robust seasonal performance since 2015.
