Recession fears may have diminished before the new year. But one bank says the US economy has not plateaued yet. It also warns of slower-than-expected growth in the first half. He also states that the developments will be positive for gold.
The soft landing will only happen for a moment, then…
Wells Fargo analysts and economists point out the mismatch between market expectations for interest rate cuts in the US and the outlook for the economy in the 2024 outlook. cryptokoin.comAs you follow from , markets are quite optimistic that the USA will not experience a recession. However, they are pricing in an easing of around 150 basis points next year. Darrell Cronk, Wells Fargo’s head of asset and investment management and chief investment officer, notes that these two market forecasts are at odds with each other. He explains that the Federal Reserve will not aggressively cut interest rates if economic growth remains relatively healthy.
Wells Fargo expects the Fed to cut interest rates just twice next year. However, analysts see downside risks to the economic outlook. Senior global market strategist Sameer Samana explains:
Either this soft landing will accelerate again and we will be dealing with inflation again, or this soft landing will only be for a moment and the economic slowdown will widen and deepen and we will find ourselves in a much harder landing. That would be really bad.
It will be a lot of fun when gold breaks above $2,100!
The bank expects this environment of diametrically opposed views to create some volatility in U.S. bond markets. He states that this will be good for gold as a store of value. Overall, the bank recommends investors take a more defensive position in their portfolios for at least the first half of 2024, as they expect the real economy, led by consumer demand, to weaken more than expected.
Wells Fargo expects the gold price to trade between $2,100 and $2,200 in 2024. John LaForge, the bank’s real assets manager, says gold has the potential to reach record prices next year. But he notes that the market needs a sustained break above recent highs. He states that gold has been in December for the last three years. It also underperforms broader commodities, he notes. That’s why some investors are hesitant to jump in, he emphasizes. In this context, LaForge comments:
Right now gold needs to prove itself. Investors say, ‘Show me the breakout.’ I think it will be a lot of fun once the market gets above $2,100 with some belief.
Headwinds will turn into tailwinds for gold in 2024!
While investors are still sitting on the sidelines, they say they are paying more attention to gold after its performance last year. LaForge points out that the gold price faces some significant headwinds as the Fed aggressively raises interest rates. Now that the tightening cycle is over, it is possible for gold to benefit from lower real interest rates. Based on this, LaForge shares the following assessment:
Considering the magnitude of the headwinds, gold prices impressively managed to maintain key support levels and even rose slightly. We believe gold can contribute to positive price momentum in 2024. Because the recent headwinds seem ready to reverse and turn into tailwinds.
This risk creates additional opportunities for the shiny metal!
At the same time, rising U.S. government debt is adding more volatility to fixed income markets. LaForge says this risk creates additional opportunities for gold. In this regard, he draws attention to the following points:
With all the debt in the world and everything that’s going on, there are very few assets like gold that are not liabilities to anyone. This is a bare instrument and I think people will want such bare instruments until we solve the debt issue.
Laforge also noted that although gold plays an important role in a portfolio, it is still only one part of a well-diversified portfolio. Wells Fargo’s market analysts recommend broad exposure to commodities in 2024 portfolio ideas. He also says investors should buy on weakness in the first half of the new year.
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