Safe havens have never been more in demand and nowhere has this been better embodied than in gold’s performance in 2023.
This trend started before the last 12 months, however. Precious metal prices have been setting annual records since the pandemic instigated a renewed sense of the need for financial security.
After trading in a range of between $,1,200 and $1,350 per ounce between 2013 and 2019, spot prices rocketed to a record average of $1,775/oz in 2020.
The average spot price then traded up to $1,800/oz in 2021 and 2022 before jumping again to $1,900/oz this year. The price of gold hit an all-time intra-day high of $2,100/oz on December 4th.
Yesterday, London’s gold price benchmark hit an all-time closing high.
Like any commodity, the price of gold is highly sensitive to economic factors, geopolitical events and supply and demand changes.
It so happens that 2023 featured notable volatility in a number of these areas; two major conflicts affecting western economies and subsequent higher demand based on these factors.
In crisis terms; the nine per cent rally in gold prices across the ten days after the outbreak of the Israel-Palestine war has been seen plenty of times before; during the 2007-2009 recession the S&P dropped almost 57 per cent, while gold went up 25 per cent.
As regards the Federal Bank, the market anticipates three rate cuts in the upcoming year, with the first expected at the Fed’s March meeting.
Lower interest rates decrease the opportunity cost of holding non-yielding bullion, boosting gold’s appeal and bond yields are already falling alongside a weakening dollar.
Indeed, in a recent interview with BNN Bloomberg, Pierre Lassonde, chair emeritus at Franco-Nevada Mining, said he believes the US dollar has peaked “and gold is the anti-US dollar so that is one of the reasons why I’m so bullish on gold for 2024.”
Lassonde added that there will be “some growth” for 2024 but the US government will bring interest rates down in a presidential election year. As rates fall, currencies like the euro and pound sterling will rise against the dollar and bolster gold even further.
“I look at 2024 as a catch-up year for the vast majority of gold stocks – I think they’re gonna outperform any other equities on the market,” he added.
The truth is that market conditions for sustained gold growth couldn’t be much better heading into 2024.
Neither the Israel-Palestine war, the Russia-Ukraine war, international cost of living crises or interest rate cuts in the US show much probability of changing course from their expected trajectory in the short term.
Indeed the World Gold Council’s 2024 outlook sees just a five per cent to 10 per cent chance of an economic scenario that would apply downward pressure on current gold prices.
What is more, 2023 was a historically bad year for banks with the collapse of Silicon Valley Bank and the dramatic sale of Credit Suisse and gold is the best hedge there is against volatility at a time when public trust in financial institutions is lower than in previous years.
Finally, the US will decide its next president at the end of 2024 – which means a full year of campaigning with two candidates as divisive as incumbent Joe Biden or potential opponent Donald Trump.
There’s no way to tell for certain, but the evidence strongly suggests gold is set to climb even higher in 2024.
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