Gold Trends for Q3 2024: What to Expect?

As we delve into the third quarter of 2024, examining the latest trends in the gold market is imperative. Our focus shifts to understanding how gold prices have evolved amidst recent developments, notably the dip observed as the US dollar index reached a two-month high in February 2024, with gold priced at approximately $2171.65 per ounce as of 26 March 2024. 

Analyzing gold trends for Q3 will give us insights into the factors influencing its value and potential implications for investors and markets alike in this article.

Gold trends for Q3 in 2024

Commerzbank forecasting gold to move beyond its all-time high

Commerzbank, Germany's second-largest bank, anticipates gold to surpass its all-time high in the coming quarters of 2024, reaching $2,100 in the latter half of the year. However, in the short term, gold prices are expected to trend sideways due to heightened uncertainty surrounding the future trajectory of US monetary policy.

While lower US inflation suggests a halt to interest rate hikes, the resilient US economic growth poses challenges for a swift reversal in interest rates. The bullish forecast for gold in 2024 hinges on expectations of a potential US economic recession, which could spur speculation about interest rate cuts.

JP Morgan’s bullish anticipation

JP Morgan Chase & Co forecasts that gold will average to $2,175 per ounce by the fourth quarter, up from around $1,915 (Q2, 2023). The bank anticipates a complete reversal in the Federal Reserve's policy of interest rate tightening in the near future, with rate cuts expected to commence by Q2 2024. 

Falling yields are identified as a significant driver for gold. In a low-rate environment, owning gold becomes more attractive as it offers a hedge against diminished returns from alternative investments in high-yield environments. JP Morgan predicts a resurgence in gold investment over the next 12 to 18 months.

Gold to be a defensive asset during recession by mid 2024

With recession risks on the horizon, investors may turn to gold as a defensive asset. A measure based on yield curve inversions suggests a 60% chance of the US economy slipping into recession by mid-2024. In mid-March, the gold contract for April settled for $2,188.60 per ounce, marking its highest level since its inception in 1974. This surge underscores gold's status as a defensive asset during times of economic uncertainty.

Gold to outperform treasuries

The current relationship between Gold (US$/OZ) and US 10-year government bond yield suggests a notable trend favoring gold prices. Gold is positioned close to its lowest point in the past decade relative to bond yields. This suggests a potential reversal in the trend of gold underperforming compared to rising bond yields. In the present economic climate, there's growing anticipation of imminent interest rate cuts by the Federal Reserve. This anticipation has sparked a rally in gold prices, indicating a notable shift in market sentiment towards the precious metal. The ongoing trend of anticipated rate cuts and the resulting rally in gold prices presents an intriguing development in the market.

Gold futures to remain elevated

In March, gold futures surged to an all-time high of $2,222.49 per ounce before settling at $2,168. Spot gold was priced at $2,166.20. The last week of March marks the fourth time in five weeks that gold is poised to close with gains. Since January 2024, the precious metal has seen more than 6% increase in value. Presently, prices have retreated from the peak as the Dollar, a primary currency for gold trading, strengthened. This strengthening comes amid speculation that major global banks may initiate interest rate cuts before the US Federal Reserve. On 21 March 2023, the Swiss National Bank reduced its policy rate, while the Bank of England hinted at an impending rate cut.

Gold to move higher when the Fed reverses its course

At its final meeting of the year, the Federal Reserve maintained interest rates at 5.25 to 5.5 percent, signaling a pause in its hiking cycle. The latest dot plot, reflecting Fed officials' forecasts for the federal funds rate, suggests the possibility of at least three rate cuts in 2024, each anticipated to be 25 basis points. While gold performed admirably amidst the higher-rate environment of 2023, historically, it tends to thrive in lower-rate environments. Consequently, many analysts anticipate a rise in gold prices as the Fed pivots.

Central bank to hold gold starting Q2 moving into Q3

Ongoing geopolitical tensions, such as the Russia-Ukraine crisis and conflicts involving Israel and Hamas, have influenced metal prices. These events have led individual investors to turn to gold as a less risky asset, with central banks also increasing their gold purchases. By the end of September 2023, they had collectively bought 800 metric tons of gold, setting a potential record. 

According to a market strategist, central banks cite various reasons for holding gold, including its performance during crises, long-term value retention, and effectiveness as a hedge against inflation and geopolitical risks. It is predicted that a monthly/quarterly/yearly close above $2,100 could trigger a significant advance in 2024, targeting $2,500. Another analyst highlights previous resistance levels and suggests that gold could see further gains once surpassed, potentially reaching above $3,000 depending on economic factors like interest rate changes.

Navigating gold’s upward momentum in Q3 2024 

Gold is anticipated to see a surge in price during Q3, primarily due to several factors culminating in anticipated Federal Reserve rate cuts. With the Fed likely to respond to economic challenges with interest rate reductions, gold emerges as an increasingly attractive investment option, poised to take advantage of its status as a less risky asset amidst global uncertainties. As such, market analysts foresee a bullish trajectory for gold in Q3 and beyond.

While bullish forecasts suggest significant potential for gold, it's essential to acknowledge the inherent risks and challenges involved. Factors such as geopolitical tensions, unexpected shifts in monetary policies, and global economic uncertainties could all influence gold prices unpredictably. Therefore, it is imperative for traders to conduct thorough research, stay informed about market developments, and remain vigilant in their investment decisions. Navigating the upward momentum of gold in Q3 2024 requires a balanced approach, emphasizing diligence and preparedness to mitigate potential risks and maximize opportunities in the market.