Jan 23: Gold is one of the most sought-after commodities in the world, and its price is influenced by many factors, such as supply and demand, inflation, geopolitical risks, central bank policies, and investor sentiment. In this blog post, we will analyze the current state of the gold market and provide our outlook for 2024.
The year 2023 was a turbulent one for gold, as the global economy recovered from the pandemic and faced new challenges, such as rising inflation, trade tensions, and environmental issues. Gold started the year at $1,850 per ounce and reached a high of $2,100 in August, as investors sought a safe haven amid uncertainty and inflation fears. However, gold prices declined in the second half of the year, as the US Federal Reserve signaled a tapering of its bond-buying program and a possible interest rate hike in 2024. Gold ended the year at $1,750 per ounce, down 5.4% from the previous year.
Looking ahead to 2024, we expect gold prices to remain volatile and range-bound, as the market balances the positive and negative factors affecting the yellow metal. On the positive side, we expect gold demand to increase from both consumers and investors, as the global economy continues to grow and incomes rise in emerging markets. Gold is also likely to benefit from its role as a hedge against inflation, which is expected to remain elevated in 2024 due to supply chain disruptions, labor shortages, and fiscal stimulus. Moreover, gold may attract safe-haven demand in case of geopolitical shocks or financial market instability, which are always possible in an uncertain world.
On the negative side, we expect gold supply to increase slightly in 2024, as mining production recovers from the pandemic-induced disruptions and scrap supply rises due to higher prices. Gold may also face headwinds from a stronger US dollar and higher real interest rates, which tend to reduce its appeal as an alternative asset. The US Federal Reserve is expected to raise its benchmark rate by 0.25% in 2024, while other major central banks may follow suit or reduce their monetary stimulus. This could dampen the demand for gold as a non-yielding asset and increase its opportunity cost.
Based on our analysis, we forecast that gold prices will average $1,800 per ounce in 2024, with a potential upside of $2,000 and a downside of $1,600. We believe that gold will remain an attractive asset for diversification and risk management purposes, but it may not deliver significant returns in a rising interest rate environment. We recommend that investors maintain a moderate exposure to gold in their portfolios, depending on their risk appetite and objectives.
By
Sujata Muguda
Shreyas WebMedia Solutions