Gold is poised for new all-time highs in 2024 – World Gold Council

(Kitco News) – Gold’s push above $2,000 in the last few weeks of 2023 could herald an even bigger move in 2024, according to the latest report from the World Gold Council (WGC).

In its 2024 outlook, the WGC analysts said they see three potential scenarios that could impact gold prices next year. In a recent interview with Kitco News, Joseph Cavatoni, North American markets strategist at the WGC, said that much of what happens in gold will be driven by the Federal Reserve and its potential rate cuts.

“The gold market is just kind of holding its breath waiting to see what the Fed does,” Cavatoni said.

In the first scenario, the U.S. economy pulls off a soft landing, avoiding a recession but will still experience below-trend growth. The WGC noted that this scenario aligns with the current market consensus and will provide some traction for gold, with prices remaining in their current trend.

Cavatoni said that if the economy keeps its current pace, the Fed would probably only cut rates twice next year.

The second scenario is the potential for a hard landing with the U.S. economy falling into a recession. This would be a bullish environment for gold as the U.S. central bank would be forced to aggressively cut rates to support the economy.

“The market risk and uncertainty in a hard landing will allow gold to flourish,” said Cavatoni. “The increasing complexity of geopolitical risks and event risks makes it difficult to see how the U.S. will avoid a recession.”

The third scenario, seen as the most unlikely, is a no-landing, as the U.S. economy continues to see solid above-trend growth. The WGC sees only a 10% chance of the U.S. maintaining above-trend growth through 2024.

While the Federal Reserve will be a major driver for the gold market in the new year, Cavatoni said that it is not the only thing that will impact prices. He noted that as the Federal Reserve aggressively raised interest rates at its fastest pace in more than 40 years this past year, the gold market still managed to trade around $2,000 and even carved out a new record high.

He explained that the Federal Reserve’s monetary policy will set the tone in the marketplace; however, geopolitical uncertainty coupled with central bank demand will continue to be important drivers for the precious metal.

Cavatoni said that central bank gold demand has completely transformed the marketplace as nations continue to diversify away from the U.S. dollar.  At the start of 2023, the WGC expected to see relatively average central bank demand, but it now expects near-record demand, matching the purchases seen in 2022.

Cavatoni said the factors driving central bank gold demand have become stronger in recent months.

“The case for central bank demand for gold is higher heading into 2024 than it was at the start of 2023,” he said.

At the same time, geopolitical uncertainty has elevated event risk heading into 2024, and Cavatoni said that he expects gold to be an attractive safe-haven asset.

“Investors are paying more attention to gold because they don’t want to be blindsided in 2024,” he said.

While Cavatoni said gold’s selloff after setting an all-time high above $2,150 an ounce last week has complicated the precious metal’s technical outlook, it shows what the market is capable of when the environment shifts.

The WGC doesn’t provide official price targets, but Cavatoni expects prices to hit new all-time highs in 2024.

“There is plenty of upside for gold if we see rate cuts,” he said.