Gold’s 2024 Outlook
Gold is now trading around $1,900 per ounce. This marks an increase of about $100 from its opening level in the second quarter of 2024. In mid-May, gold reached a new all-time high. The global interest rate environment has greatly influenced this trend. Anticipated rate cuts, especially in the United States, have not occurred as inflation remains above central bank forecasts.
Delays in US Interest Rate Cuts
At the beginning of 2024, markets expected four to five 25-basis-point rate cuts by the Federal Reserve. Initially, the second quarter expected the first cut. However, these expectations have changed. Now, projections indicate one or two rate cuts starting at the November Federal Open Market Committee (FOMC) meeting. The FOMC’s June dot plot projections support this new outlook.
Central Bank Demand for Gold
In 2023, central banks added 1,037 tonnes of gold. This marks the second-highest annual purchase in history. According to the World Gold Council’s 2024 Central Bank Gold Reserves survey, 29% of central bank respondents plan to increase their gold reserves in the next twelve months. This is the highest level observed since 2018. The planned increase aims to rebalance strategic gold holdings, domestic gold production, and address financial market concerns, such as higher crisis risks and rising inflation. These purchases might support gold prices in the medium term, countering the higher-for-longer interest rate environment.
Geopolitical Risks and Safe-Haven Demand
The latter half of 2024 is eventful, with significant elections in the United States, France, and the United Kingdom potentially influencing market volatility. The U.S. election, in particular, is contentious regarding expectation, with a potential rematch between President Joe Biden and former President Donald Trump. Additionally, global conflicts in Ukraine, Gaza, and the Middle East continue to pose risks, potentially increasing demand for gold as a safe-haven asset.
Gold’s 2024 outlook remains influenced by multiple factors. Interest rates, central bank demand, and geopolitical risks all play a role in shaping gold prices. As we move through the year, these elements will continue to interact. Therefore create a dynamic environment for gold traders and investors with a close watch on these developments will be crucial for anyone involved in the gold market.
