Chennai: Heightened geopolitical tensions in key elections in many major economies, combined with continued central bank buying could provide additional support for gold in 2024, finds the World Gold Council.
The US Federal Reserve’s decision in terms of interest rates and tackling inflation will be key drivers of gold prices in 2024. The Fed’s policy can determine the gold’s performance from a muted one to a 10 per cent gain. The likelihood of the Fed steering the US economy to a safe landing with interest rates above five percent is by no means certain
In 2023 there were two significant event risks – the Silicon Valley Bank failure and the Israel-Hamas conflict. Geopolitics added between 3 per cent and 6 per cent to gold’s performance. And in a year with major elections taking place globally, including in the US, the EU, India, and Taiwan, investors’ need for portfolio hedges will likely be higher than normal in 2024.
Purchases by official institutions have helped gold defy expectations over the past two years. In 2023 we estimate that excess central bank demand added 10 per cent or more to gold’s performance. And they will likely continue buying.
Even if 2024 does not reach the same highs as the previous two years, WGC anticipates that any above-trend buying should provide an extra boost.
The probability of a recession is not insignificant. From a risk-management perspective, this would provide strong support to the case of maintaining a strategic allocation to gold in the portfolio.
