In 2023, gold surged to its 3-month high and provided investors with returns equaling around 9.1%. Trading gold has always been alluring to traders due to its role as a less risky asset and its historical resilience. Gold has often outperformed in market volatility, making it an attractive portfolio diversification option. Of course, just like every other asset, it comes with its own set of risks.
Let’s take a look at the gold price forecast for 2024 to understand what traders can expect from this asset.
Top gold price predictions for 2024
Gold at $2,200 by December 2024, as per BoA
Bank of America (BoA) forecasts gold to trade close to $2,200 by December 2024. The prediction is grounded in several bullish indicators, such as the USD's limited upward movement, recent declines in yields, and a favorable Commitment of Traders (CoT) report.
CNBC financial experts predict a substantial increase in gold prices, projecting a rise to $5,000 per ounce. It is backed by current low prices to the Federal Reserve's interest rate hike. They anticipate that the economic downturn will force the Federal Reserve to reverse its rate hike and reinstate gold as a less risky asset. It is believed that the Fed will have to change course in the near future, bringing rates into negative territory and implementing another round of quantitative easing (QE4), which he expects to be larger than ever.
Morgan Stanley's bullish call on gold
Morgan Stanley has expressed a bullish stance on gold as it foresees US stocks and bonds outperforming their emerging markets counterparts. The company’s top strategists expect US earnings growth to reach a trough in early 2024 and subsequently rebound. They anticipate that US growth will remain robust compared to other regions, with emerging markets growth likely to disappoint and shift investors towards gold as an investment. Their focus on gold prices has strengthened as they believe yields will fall to 3.95%.
JPMorgan views both gold and silver as valuable late-cycle diversifiers, well-positioned to perform over the next 12 to 18 months, irrespective of whether the US experiences a soft or hard landing.
Gold prices to increase against USD if the Fed does not increase interest rates
The forecast also suggests that if the Federal Reserve (Fed) does not increase its interest rates, it could lead to a further jump in gold prices against the USD. The conventional inverse relationship between interest rates and gold prices is at play here, where lower interest rates tend to make non-interest-bearing assets like gold more attractive. US’s soft economic data has suggested that the slowdown will continue, which will require a hike in interest rates.
Gold prices to catch up as the monetary base flattens
Analysts have suggested that gold prices are expected to catch up as the monetary base flattens. The divergence between gold prices and the monetary base is seen as temporary, and the forecast anticipates that gold will align with the monetary base over time. This indicates a belief that market dynamics will eventually bring gold prices in sync with broader monetary conditions.
A flat monetary base in 2023 has resulted from the ongoing changes in the Federal Reserve's monetary policy, potentially contributing to an upward trajectory in gold prices. One crucial aspect of the Federal Reserve's monetary policy is the target federal funds rate, which influences interest rates across the financial system. Typically, when the Fed raises interest rates, gold prices also tend to increase, serving as a hedge against inflation. It is likely to continue in 2024. The Fed's bond-buying programs, such as quantitative tightening, will also impact gold prices positively.
Gold prices could further increase if EUR continues to remain bullish
The forecast suggests that gold prices may experience further increases if the Euro (EUR) continues its bullish momentum. Gold typically thrives when the Euro is in an upward trend due to their direct relationship, and this prediction hinges on the historical correlation between the Euro's strength and gold's performance. The analysis indicates that the Euro's sustained bullish mindset, as indicated by historical chart patterns, resistance levels, and decreasing volatility, is expected to prevent gold from entering a long-term bear market.
This forecast underscores the significance of monitoring the Euro's trajectory as a crucial leading indicator influencing the potential upward movement of gold prices, highlighting the interplay between major currency movements like USD and EUR and precious metal performance in the global market. Investors are advised to stay attuned to developments in the Euro to assess their potential impact on gold's overall bullish trend.
Trade gold with caution and a positive outlook
Collectively, these predictions highlight a positive outlook for gold in 2024, driven by a combination of macroeconomic factors, market dynamics, and historical trends. Investors should, however, exercise caution and consider a range of factors when making investment decisions, as market conditions can change, and unforeseen events may impact outcomes.
*Past performance is not a reliable indicator of future performance.
