According to the latest report of the World Gold Council (WGC), gold’s rise above $ 2,000 in the last weeks of 2023 could herald an even bigger move in 2024.
The gold market is waiting for what the Fed will do!
In their 2024 outlook, WGC analysts say they see three potential scenarios that will affect gold prices next year. Joseph Cavatoni, WGC’s North American markets strategist, states that much of what happens in gold will be driven by the Federal Reserve and potential interest rate cuts. “The gold market is waiting with bated breath to see what the Fed will do,” says Cavatoni.
First scenario for the yellow metal: Light traction
In the first scenario, the US economy does not make a soft landing and enter a recession. However, it still experiences below-trend growth. The WGC says this scenario is consistent with the current market consensus. He also notes that there will be some traction for gold as prices remain in their current trend. Cavatoni predicts that if the economy maintains its current pace, the Fed will likely cut interest rates only twice next year.
Second scenario for gold: A strong bullish environment
The second scenario is based on the possibility of the US economy falling into recession and making a hard landing. In this scenario, the Fed would have to cut interest rates aggressively to support the economy. This situation will create a bullish environment for gold. Cavatoni explains this scenario as follows:
Market risk and uncertainty in a hard downturn will enable gold to thrive. The increasing complexity of geopolitical and event risks makes it difficult to see how the United States will avoid a recession.
Third and least likely scenario: USA will grow solidly
The third scenario, which is considered the least likely, is that there is no downturn as the US economy continues to show solid above-trend growth. But the WGC sees only a 10% chance of the U.S. continuing above-trend growth through 2024.
The Federal Reserve will be an important driving force for the gold market in the new year. However, Cavatoni says that’s not the only thing that will affect prices. The Fed raised interest rates last year at the fastest rate in more than 40 years. cryptokoin.comAs you can see from , however, the gold market still managed to trade around $2,000. Cavatoni even emphasizes setting a new record.
WGC expects record gold demand from central banks
Cavatoni says the Fed’s monetary policy will set the tone in the market. However, he also notes that geopolitical uncertainty and central bank demand will continue to be important drivers for the precious metal. Cavatoni says central bank gold demand is completely changing the market as countries continue to move away from the US dollar.
The WGC expected to see relatively average central bank demand at the beginning of 2023. But it now expects near-record demand to match purchases seen in 2022. Cavatoni states that the factors driving central bank gold demand have become stronger in recent months. “The situation regarding central banks’ gold demand is higher towards 2024 than at the beginning of 2023,” says Cavatoni.
If we see this, there is a lot of bullish for gold!
At the same time, geopolitical uncertainty has increased the risk of events heading into 2024. That’s why Cavatoni says he expects gold to be an attractive safe-haven asset. The strategist said, “Investors are paying more attention to gold. Because they don’t want to be caught off guard in 2024,” he says.
Cavatoni notes that the sell-off in gold, which reached an all-time high above $2,150 last week, has complicated the technical outlook for the precious metal. But he says it shows what the market can do when the environment changes. WGC does not provide official price targets. However, Cavatoni expects prices to reach an all-time high in 2024. “There’s a lot of upside for gold if we see interest rate cuts,” Cavatoni says.
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