Gold prices likely to stay above $2,000 in 2024, say analysts

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Gold prices are expected to stay above $2,000 an ounce in 2024 due to economic, political, and geopolitical risks around the world.

Economists say that the future appears “both promising and precarious.”

In 2023, the gold market experienced a turbulent journey, reaching unprecedented heights above $2,100 before experiencing a dip and stabilising around the $2,050 level.

Spot gold was trading at $2,063.67 per ounce on Tuesday afternoon, up 0.51 per cent, as US dollar and bond yields fell on growing prospects for interest rate cuts by the Federal Reserve. Gold hit a more than two-week high of $2,070.39 in the previous session.

Rania Gule Market Analyst at XS.com, expects yellow metal prices to remain above $2,000 in the short term.

“It's worth noting that my long-term bullish outlook for gold relies on several drivers, particularly when the Federal Reserve begins cutting interest rates, reducing the opportunity cost for non-yielding gold. However, I expect economic, political, and geopolitical risks to remain high in 2024, supporting gold as a haven,” said Gule.

It is projected that the Fed is forecast to cut interest rates between 50 to 125 basis points (bps) in 2024, driving down returns on deposits, hence, pushing investors to yellow metal for higher returns.

She pointed out that the upcoming US elections in late 2024 could also increase uncertainty about future monetary policies, potentially encouraging investors to diversify their portfolios by adding gold investments. Central banks' gold purchases are expected to continue, with the US central bank possibly buying around 820 tons or more, further supporting positive price trends.

Vikas Lakhwani, chief research officer, CPT Markets, is bullish about the precious metal based on the weakening dollar reigniting interest in gold, geopolitical uncertainty in Ukraine and the Middle East and the central bank continuing to be net buyers of metal.

He expects gold to trade between $1,975 to $2,000 an ounce during the first half of 2024 and between $2,050 to $2,100 in the second half of the year with an average price of $2,031.

However, he pointed out that global recessionary concerns, the resurgence of the greenback and profit-taking in the yellow metal could dampen demand and exert pressure on the prices.

“Overall, the gold market currently finds itself at a critical juncture. While several factors support a bullish outlook, significant risks persist. At this moment, we advise approaching the market with cautious optimism,” said Lakhwani.

He advised investors to watch out for Fed policy regarding interest rates, inflation trends in the US and geopolitical events for a better understanding of the market’s direction.

Yeap Jun Rong, market strategist at IG, sees the macro backdrop for the yellow metal turning for the better as the Fed’s rhetoric continues to head in a less hawkish direction.

“Following the Fed’s most aggressive series of rate hikes in 40 years, markets are now looking for 125 basis point (bp) worth of rate cuts through 2024, with firm belief that we have already seen the peak in the Fed’s hiking cycle,” he said.