Analysts predict substantial gold gains as we approach 2024 with declining interest rates, high recession fears, and rallying interest in safe-haven assets. On August 7, 2020, spot gold hit its record high price of $2,072.50 amid peak COVID-19 concerns, labor supply shortages, geopolitical concerns, and numerous other crises. Analyst Bart Melek believes gold is on track to beat this record by a wide margin next year.
“I do see gold move above $2,100 in late 2023, early 2024 as a trading level,” Makek, the managing director and global head of commodity strategy at TD Securities, explained in an interview with CNBC. Makek’s primary reasoning behind the positive opinion is the likely end to the Fed’s interest rate hiking cycle.
“I am positive on gold as I believe that the Fed will tilt policy away from its current restrictive mode. This, I believe, will happen before the 2% inflation target is reached,” Melek continued.
In March 2022, the Federal Reserve began its rate-hiking cycle as inflation began climbing to its highest rates in the last 40 years. Since then, the committee increased rates to 5.25% to 5.5%, also showing the highest level since the 1980s.
In the last year, gold has consistently outperformed most other major assets. Despite the high interest rates, the precious metal has held strong as investors flocked toward safe-haven assets amid banking concerns and recession fears.
A few analysts believe gold can achieve levels as high as $2,500 per ounce by the end of 2024. If this prediction comes true, gold would gain 26% in the next year, which may sound out of reach, though the same occurred just a few years back. In 2020, gold achieved a yearly gain of 25.75%.
“My target is $2,500 by the end of 2024 … Much of this has to do with the fact that recessionary forces may take hold beginning later this year and gain steam in 2024,” David Neuhauser, the founder of Livermore Partners, explained. “2024 is when I see gold breaking out and reaching new highs and beyond.”
Neuhauser predicts persistent levels of stagflation around the globe for the next few years, with rates varying between 3% and 5%. Gold typically excels during such periods of economic uncertainty. Investors and organizations use the safe-haven asset to hedge against inflation and protect their wealth from looming recession fears.
“Any type of recessionary move would be positive for gold,” Randy Smallwood, the CEO of Wheaton Precious Metals, stated. “I’m pretty confident that within a couple of years, we will see $2,500 gold.”
“Key driver in our positive outlook for gold is anticipated peak in Fed rate hiking cycle as well as upcoming topping out of US Dollar strength,” Heng Koon How, UOB’s head of markets strategy, global economics, and markets research, explained.
Heng forecasts gold to reach $2,100 by 2024’s second quarter. Due to the inverse relationship between gold price and interest rates, we will need to wait for a drop in rates to see gold truly take off.
Gold also gains its value from other critical demand sectors beyond investors, though. Central banks have become a critical form of support for the precious metal over the last two years, adding to its price gains. Heng believes central bank buying has been “consistently strong.”
“We also see a return of physical gold jewelry demand from China and India as both economies stabilize and retail spending returns,” Heng added.
While other commodities in China show weak figures, gold retail demand shows resilience. The gold jewelry demand levels for the first quarter of the year in China were ″just shy of 200t, the strongest seasonal since 2015,” according to Aakash Doshi’s analysts at Citi.
Citi forecasts China’s jewelry demand to reach 700 tons this year, depicting a 22% increase for the year.
“Whether it’s jewelry, whether it’s bars, whether it’s coins. We have seen a pickup in that,” Smallwood explained.
As retail and physical demand for gold increases from previous lulls and central bank demand remains consistent, analyst predictions only make sense. Nations around the globe are relying on more gold as they step away from other currencies. The moment interest rates begin dropping, the precious metal can excel.
“Emerging market central banks continue to de-dollarize and utilize gold as an alternative in the event of any further Western sanctions,” Nicky Shiels, the Head of Metals Strategy at MKS PAMP, explained.
Traders may look at current gold prices as an opportunity to buy in before the next price jump. As always, investors should consult their advisors before making any portfolio decisions.