Gold has unlimited potential in 2024

(Kitco News) – 2023 is quickly coming to a close, which means that Kitco News has launched its annual outlook series. For the last few weeks, the news team has been collecting bank reports, talking to analysts and listening to webinars to get the latest and best information on what investors can expect in the new year.

The broadest consensus among most analysts is that the Federal Reserve will continue to drive gold prices. However, with the Fed Funds rate at its peak, the only direction to go is down. It’s now a just question of when and how fast that decline will be.

In its updated economic projections on Wednesday, the Federal Reserve signaled that it sees the potential for three rate cuts in 2024. This is the first clear signal that the committee is ready to pivot, which will be positive for gold.

In 2023, the precious metal was able to withstand the Federal Reserve’s most aggressive hiking cycle in more than 40 years. Despite rising yields, gold held critical support above $1,800 an ounce. The question is, what will happen to gold as the headwinds start to dissipate?

We saw a glimpse of gold’s potential as prices spiked to $2,152 an ounce early last week. Technically, that was a blowoff top as some momentum traders pushed the market in illiquid conditions; however, many analysts have said this will not be the high-water mark for gold.

Bank of America is looking for gold prices to push to $2,400 an ounce in 2024. Saxo Bank sees gold prices hitting $2,300 an ounce. Wells Fargo said that it’s watching for $2,100 an ounce.

This week, Kitco News had a chance to talk to George Milling-Stanley to get his forecast. His team sees a 50% chance gold trades between $1,950 and $2,200 an ounce next year; at the same time, he said there is a 30% chance of prices trading between $2,200 and $2,400 an ounce.

“When gold finds its momentum, there is no telling how high prices can go,” he said. “There is a very good chance we will see all-time highs next year.”

The World Gold Council didn’t give a price target in its 2024 outlook, but said they expect to see a solid uptrend in the new year.

However, even with all this bullish sentiment, investors still need to be patient. Bank of America doesn’t expect gold prices to start moving until the second half of the year. In their 2024 outlook webinar, the analysts said that while gold has been waiting for the Fed’s pivot, it will take an actual cut before gold moves in earnest.

While gold is expected to have solid support above $1,900 an ounce, it might not be ready to break through $2,050 as the Federal Reserve and market expectations remain far apart. The Fed has signaled three rate cuts next year, while markets are calling for the Fed Funds rate to be below 4% this time next year.

Unless the U.S. economy falls off a cliff in January, it’s unlikely the Federal Reserve will cut rates in March, so this difference in expectations could create some short-term headwinds and keep some investors on the sidelines.

The best advice we have heard so far is that investors should enjoy the upcoming momentum, but they shouldn’t be in a hurry to chase the market.

One final note: this will be our last newsletter for 2023, so everyone on the Kitco News team would like to wish you and your families happy holidays and a prosperous new year.

Have a great weekend, and see you in 2024!