Although the gold market has lost ground, it remains stuck in the neutral zone above $2,000. But gold remains an important hedge against inflation and financial market risks, a research firm says. Therefore, he predicts that the precious metal will rise as the year progresses.
There are many factors that will support gold prices other than the Fed!
BCA Research analysts say they expect gold prices to rise to $2,200 this year in their 2024 outlook forecasts. cryptokoin.comAs you follow from , many gold investors continue to monitor the Federal Reserve for signs of easing. BCA analysts state that there are many other factors that will support the rise in gold prices in the new year.
Looking at US monetary policy, BCA expects the Fed to lower interest rates more slowly than markets expect. Currently, the central bank is signaling three potential rate cuts this year. The CME FedWatch Tool shows that markets see the Fed Funds rate falling below 4.00% by the end of the year. At the same time, BCA does not expect longer periods of higher interest rates to push the economy into recession, even if activity slows. The Montreal-based research firm says falling inflation pressures and healthy wages should support economic activity by boosting real consumption. In this context, analysts make the following assessment:
Wages increased after the pandemic. As a result, households will see their purchasing power increase. So real disposable income will increase. Although the number of unemployed people per open job appears to be returning to pre-pandemic levels, from almost double the rates seen before Covid-19, this situation will continue in the short term.
It is difficult for inflation to fall below the Fed’s target!
Although it expects inflation to fall, BCA says inflation is unlikely to reach the Fed’s 2% target. This, he says, would make gold an attractive long-term inflation hedge. Therefore, this will be a supportive element for gold prices. Analysts also point to rising government debt, geopolitical uncertainty and changing globalization trends. They predict that these will support long-term inflation. Based on this, analysts make the following statement:
Rising federal debt increases the likelihood that the Fed will be forced into a fiscal dominance operational mode. Therefore, it remains a medium-to-long-term inflation risk. Global economic fragmentation will weaken well-developed supply chains and make resource allocation more inefficient. Therefore, it remains an inflation risk in the medium-long term.
Geopolitical uncertainty and central bank purchases will support the gold price
Analysts also expect geopolitical uncertainty to support gold’s safe-haven appeal through 2024. They say the transition to green energy and the race to secure raw materials to meet long-term goals will tighten geopolitical tensions globally. In this context, “Tensions in the Middle East, Eastern Europe, and the East and South China Seas remain high and will increase. “This too is an inflation risk as wars continue and the possibility of larger-scale kinetic conflicts increases.” They are making their evaluation.
The last factor that will support gold prices until 2024 is the continuation of strong central bank demand. Analysts say rising geopolitical tensions will put pressure on the US dollar as the world’s reserve currency. They state that this will make gold an attractive monetary metal. In this regard, analysts underline the following points:
As the world fragments into East-West trading blocs, the continuing trend of trade fragmentation will challenge the need for a monetary system centered on the US dollar. We will also see Central Banks turning to gold as a safe haven amidst increasing global economic policy uncertainty.
Meanwhile, BCA has been investing in long gold since November 2022. He states that he achieved a return of over 15% on these transactions.
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