In the 'Gold Outlook 2024The WGC's report predicts a possible "soft landing" in the U.S., bringing down inflation without triggering a recession. While such conditions have historically not always been favorable for gold, this year's unique circumstances — including heightened geopolitical tensions and elections in major economies — may provide additional support to the gold market. The WGC emphasizes that, despite the possibility of a soft landing, a global recession still poses a risk. This could motivate investors to include gold as a safe haven in their portfolios. Events such as the collapse of Silicon Valley Bank and the Hamas's attack on Israel in 2023 have already contributed to a rise in the price of gold.
The role of central banks on the price of gold
John Reade, chief market strategist at the WGC, expects gold prices to remain volatile in 2024, reacting to economic indicators and Federal Reserve (Fed) policy. While interest rate cuts tend to be positive for gold, a faster cooling of inflation and lower growth expectations could dampen gold demand. A key factor supporting the gold market is continued central bank purchases. These banks have become a major player in the gold market since the global financial crisis. While 2023 is likely to be a record year for central bank purchases, the WGC expects this trend to continue in 2024, which could provide additional impetus to gold prices.
In summary, the combination of geopolitical uncertainty, monetary policy, and the role of central banks is expected to have a significant impact on the gold market in 2024. While the exact direction of gold prices remains uncertain, the metal appears to continue to play an important role in global financial markets.
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Source: CNBC
Author: Elliot Smith
