Gold was a standout performer in 2023, beating most other assets, even as the market faced high interest rates that defied predictions. As 2024 draws near, investors will likely see one of three scenarios play out for the yellow metal: a soft landing, a recession, or a no landing — with market consensus anticipating a soft landing for the US.
The US economy is a significant driver of gold prices as it influences investor sentiment, interest rates, and inflation expectations. 2023 witnessed the US economy rebounding from the impacts of the Covid-19 pandemic, multiple bank failures, and further interest rate hikes.
The World Gold Council is anticipating a ‘soft landing’ scenario for 2024, where growth slows down but does not contract, and inflation cools down sufficiently for central banks to begin cutting rates. Such a scenario would be a welcome outcome for many investors, but its execution requires precise policy actions and favourable external factors. Historically, the Fed has managed a soft landing only twice following nine tightening cycles over the past five decades. The other seven ended in a recession.
A recession, or hard landing, is a less likely but still possible outcome, where growth and inflation turn negative, and interest rates stay high. This scenario is favourable for gold, as it acts as a hedge against uncertainty and risk.
A less likely third option is a ‘no landing’ scenario, where inflation and growth reaccelerate, driven by a rebound in US manufacturing and real wages. This could pose a challenge for the Fed, as it would have to balance the risks of overheating and slowing down the economy. This scenario is challenging for gold, as it faces competition from other assets and inflation expectations.
The forecast
In October, Reuters conducted a poll on 30 different analysts and traders which returned a median forecast for gold at US$1,986.5 per troy ounce for 2024, up from the US$1,925 expected of 2023. Considering the timing of this poll, predictive trends have shifted upward.
Experts and analyst predictions for the gold price in 2024 now vary, with answers ranging anywhere from US$1,950 – US$2,300. Reasons contrast from changes in the US dollar, Fed stance, bank failures, geopolitics, elections, and more.
Barrick Gold Corporation (NYSE: GOLD | TSX: ABX), the world’s second largest gold producer, cited geopolitical conflicts as a big player in gold price.
“Gold also measures the global economic perception and the perception of risk: when last did we have risks like this?”, commented Barrick CEO, Mark Bristow in an interview on gold outlook. “We have more conflicts across the globe than we have seen since [the end of the Cold War] and so that’s another driver.”
Where gold traded at a daily average of US$1,818/oz before the Hamas attack on Israel, gold climbed 13% to a record daily average high of $2,056/oz on 1 December, hitting an intraday peak of US$2,152/oz in the spot market. Below are some additional forecasts for the gold price in 2024:
- According to global exchange-traded fund and asset manager WisdomTree, gold prices will climb throughout 2024. In its bull forecast, the firm projects prices could get as high as US$2,300/oz citing the US presidential election and regional war as potential flash points
- Multinational investment bank, UBS, expects gold prices to go higher in 2024 and into 2025, citing macroeconomics factors like fed expectations, real rates, and the US dollar as reasons why gold could hit a high of US$2,200/oz by the end of next year
- In TD securities model portfolio for gold, they have a technical short of US$2,070/oz, with beliefs that the gold price could dip as low as US$1,950/oz but could also hover around US$2,100/oz in the second quarter of 2024 with the weakening of the US dollar
The bottom line
Gold is a unique asset that has multiple sources of demand and supply. Its price and performance depend on various factors, such as the state of the global economy, the monetary policy actions of central banks, the strength of the US dollar, inflation levels, geopolitical risks, and investor sentiment.
Based on these insights, the gold outlook for 2024 remains bullish but with natural caveats and uncertainties, especially for those in the metals and mining industry
“That’s been the biggest disappointment,” said Barrick’s Bristow. “Share prices have not responded as one would have expected on the back of rising commodity prices, particularly
gold.”
