Will Gold Hit New Highs in 2024?

• Gold prices hit a record high of $2,078/oz in December 2023, up 15% for the year
• Drivers included weak dollar, expected Fed rate cuts, geopolitical conflicts, central bank buying
• Gold outlook for 2024 depends on continued central bank demand, geopolitics, potential inflation resurgence
• Recession risks provide upside for gold as an effective hedge
• Forecasts for 2024 average gold prices range from $1,950/oz to $2,200/oz
• JPMorgan predicts prices peaking at $2,300/oz in 2025 as Fed cuts rate
• After strong 2023, key 2024 drivers expected to be Fed rate cuts, geopolitics, central bank purchases

Will gold prices hit another all-time high in 2024?

Gold prices hit a record high in December 2023, driven by a weak dollar, expectations of rate cuts by the Federal Reserve, geopolitical conflicts, and central bank buying. Prices are forecast to temporarily dip in early 2024 before climbing to new highs later in the year as the Fed begins cutting rates. J.P. Morgan predicts gold will peak at $2,300/oz in 2025. Lower interest rates and falling real yields in the U.S. are expected to be the main drivers pushing gold prices higher. Geopolitical tensions and continued central bank purchasing will also support prices. There is also room for more investor demand to drive prices up through increased ETF holdings and futures market positioning. Outflows from gold ETFs are expected to reverse with lower rates.

Gold hit new highs in 2023

Gold prices rose 15% in 2023 to reach a record high of $2,078 per ounce. This was an annual closing high price record in all major currencies except the Swiss Franc.

Central bank demand, primarily from emerging market institutions, contributed an estimated 10-15% to gold's annual performance. This demand helped offset lacklustre activity from developed markets.

Elevated geopolitical risks contributed to gold's returns and helped mitigate drags from falling inflation and other risks.

Interest rates and bond yields had less of a negative impact on gold prices than might have been expected. A round trip in yields over the year coupled with strong central bank demand helped limit downside.

Gold's self-correcting tendency, where price sensitive buyers balance momentum investors, likely reduced volatility compared to other commodities.

The outlook suggests further upside for gold depends on factors like continued central bank purchases and persistent geopolitical uncertainties, while a resurgence of inflation could also be a positive driver.

Gold Outlook 2024

Gold had a strong 2023, defying expectations amid a high interest rate environment, and outperforming commodities, bonds and most stock markets. As we look forward to 2024 investors will likely see one of three scenarios.

1. Soft landing (most likely): Subpar but positive GDP growth globally. Historically not great for gold returns (flat or slightly negative). But geopolitical tensions and continued central bank buying could provide support for gold this time.
2. Recession (possible): 45% average probability based on indicators. Weaker growth, lower rates, could create a positive environment for gold as an effective hedge. Gold has performed well historically in recessions.
3. No landing (unlikely): Reacceleration of inflation and growth. Could prove challenging initially for gold due to higher rates and stronger dollar. But could lead to harder landing later, which would support gold.

Additional factors that could help gold in 2024:

• Geopolitical risks continue to bubble in the Middle East adding to near-term inflationary risks in addition to  major elections globally. There is an increased need for portfolio hedges.
• Continued central bank buying, though maybe not as strong as 2020-2023. But still a tailwind compared to past trends.

So while soft landing scenarios have not been great for gold historically, unique factors this time around could lead to a break from the past. And recession risks mean strategic gold allocations are still warranted.

Gold to hit fresh highs in 2024

Following the price rise to a record high in 2023 amid geopolitical conflicts and economic uncertainty, ING Bank believes gold prices will be supported going into 2024 amid a weaker US dollar on the back of US monetary easing. The risk of tensions escalating in the Middle East should also provide support to the precious metal.

ING Bank expects gold prices to hit fresh highs in 2024 and to average $2,100/z in 4Q, with a 2024 average of $2,031/oz on the assumption that the Fed starts cutting rates in the second quarter of 2024, the dollar weakens, safe-haven demand continues amid global economic uncertainty and central bank buying remains at high levels. Downside risks revolve around US monetary policy and dollar strength. The higher-for-longer narrative could see a stronger dollar for longer and weaker gold prices. Meanwhile, geopolitical instability offers upside risks for the gold market in 2024.

Gold prices Forecasts for 2024

Most forecasters expect gold prices to rise in 2024 due to ongoing geopolitical tensions and expectations that major central banks like the Federal Reserve will cut interest rates. Banks and institutions predict average gold prices ranging from $1,950/oz (Bank of America) to $2,200/oz (Wells Fargo). JPMorgan sees prices averaging $2,175/oz as the Fed cuts rates. Morgan Stanley forecasts $2,019/oz, driven by geopolitical risks. UBS predicts prices hitting a new record high of $2,150/oz by end-2024 as US rate cuts begin. Wells Fargo expects prices to hold early in 2024 before advancing to near $2,200/oz. Pictet Asset Management sees gold benefiting from a weaker dollar as US policy tightening ends while geopolitical frictions rise. Overall most expect rate cuts and continued geopolitical uncertainty to boost gold prices to new highs in 2024.

Moderate start to 2024

Heading into 2024, positive January seasonal trends for gold could conflict with some pushback against the dovish sentiment that drove late 2023 gains.

There may also be an ongoing tug-of-war between inflationary fears (e.g. rising shipping costs) and recessionary signs (e.g. falling hiring) highlighting the difficulty of engineering a soft economic landing.

2024 so far…

Gold prices fell 1% over the past week, poised for the biggest weekly decline in six weeks.

The fall in gold prices is due to lowered expectations of an early interest rate cut by the Federal Reserve after comments from Fed officials this week. The recent speculation and volatility around Fed rate cut timing has impacted gold prices this week. Lower rates typically support gold by decreasing the opportunity cost of holding non-yielding bullion.

Gold enters 2024 after a strong 2023 performance thanks to central bank and geopolitical catalysts, but faces some mixed signals early in the year as markets balance dovish policies with lingering inflation and growth concerns.

Gold gained 13% in 2023, hitting a record high price in early December. Analysts predict gold prices will continue rising in 2024, potentially reaching $2,300 according to J.P. Morgan forecasts. 

Key drivers expected to support prices include a dovish pivot by the Fed leading to interest rate cuts, continued geopolitical tensions, and central bank buying. Other bullish factors for 2024 are increased ETF inflows, hedge funds chasing momentum, and safe haven demand amid global uncertainty.