14/08/2023Daniel Fisher

The financial world of 2023 has witnessed severe monetary policy tightening across many regions to control runaway inflation. Speculation mounts as to whether we’re near the end of this cycle and if so, when will central banks begin to pivot into a more bullish scenario. This macro environment dictates how many asset classes perform, especially precious metals like gold, which is closely linked to the US Dollar. This article is your guide to what leading analysts predict for the year ahead. We will explore the forecasts of gold prices in 2024, using knowledge from top experts and reliable sources.

Think about gold. It’s not just a pretty yellow metal. For ages, it’s been a big player in economies worldwide, often used as a hedge against inflation. It’s in everything from rings to machines. And the tug-of-war between how much gold is available and how much people want it can really shake up its price, especially during economic uncertainty.

Fast forward to 2023. The current trends in central bank buying of gold show strong demand and a growing interest in the precious metal, with several institutions increasing their gold reserves. Gold prices shot up, nearly setting records in May. The reasons? A mix of things. Debates about the US debt ceiling, banking concerns, and a careful stance from the Federal Reserve all had a role. So, what’s on the horizon for this non-yielding asset? What’s our take on gold prices in 2024 and beyond?

We will examine a range of elements that could sway gold prices in 2024. We’ll look at the state of the US economy, the Federal Reserve’s money plans, the power of the US dollar, our thoughts on inflation, risks in global politics, and the general feeling among investors.

Based on what our experts and sources tell us, the price of gold could increase in 2024, hitting around $2,100 per ounce by the time we ring in 2025. But keep in mind that this is an educated guess. The current gold prices and forecasts for gold should guide us, but the economic landscape always offers surprise turns. Things can shift, and there’s always a bit of guesswork involved.

Factors That Could Affect the Gold Price in 2024

Gold, compared to other asset classes, tends to maintain its value over time, serving as a reliable store of value. However, gold’s price is influenced by a myriad of factors, both positive and negative. In the following sections, we will delve into the key factors that could shape the gold market in 2024:

• The US economic outlook
• The Federal Reserve’s monetary policy
• The US dollar’s strength
• Inflation expectations
• Geopolitical risks
• Investor sentiment

The US Economic Picture

The US economy is a significant driver of gold prices. Its condition influences investor sentiment towards secure assets, their predictions on interest rates, and their perceptions of inflation. The year 2023 witnessed the US economy rebounding from the impacts of the Covid-19 pandemic. However, this recovery wasn’t without its obstacles. These included a shortage of workers, disruptions in supply chains, an escalation in raw material prices, and a slowing pace of consumer spending. Together, these elements contributed to an overall economic deceleration.

As we transition into 2024, we might observe minor disturbances in the US economy, potentially towards the end of 2023 or the start of 2024. The causes could range from the fiscal cliff and issues surrounding the debt ceiling to the Federal Reserve’s sustained tightening of policies.

These changes may temporarily drive up gold prices in the short term as investors seek reliable assets to guard against inflation and financial instability. However, as the economy strengthens and interest rates rise over time, these factors could lead to a subsequent decline in gold prices.

The Federal Reserve’s Money Plans

The Federal Reserve’s monetary strategies significantly sway gold prices by influencing real interest rates, which typically have an inverse relationship with gold prices. Throughout 2023, the Federal Reserve sustained its highly accommodative stance. It held the prime rate near zero and purchased assets at an impressive rate of $120 billion monthly. This approach responded to economic uncertainties and was crucial in ensuring the economy’s stability.

As we enter 2024, the Federal Reserve may consider decelerating its asset purchases in the first or second quarter. Economic data trends and inflation pressure at that time will shape this decision. The latest forecasts also hint that the main rate could be nudged upwards by 25 basis points in the latter half of 2024.

Such a move could drag gold prices downward as people anticipate reduced stimulus and climbing interest rates. However, if high inflation persists and real interest rates stay in negative territory, it could support gold prices.

The Power of the US Dollar

The strength of the US dollar significantly influences gold prices. The two assets compete as the preferred global safe haven. If the Dollar rises, generally the worth of gold will fall and vice versa.In 2023, the US dollar appreciated against most major currencies as The Fed Reserve increased interest rates.

This trend was driven by the need to curb inflation which hit a high of 9.1% in 2022. Meanwhile, increased bond yields, and heightened demand for secure assets, enhanced gold’s allure.

As we look ahead to 2024, the US dollar could maintain its robustness or grow even stronger versus competing currencies. The performance of other economies, particularly China and Europe, and their respective monetary policies will be significant determining factors. Should the dollar remain strong, it might limit the potential increase in gold prices. A strong dollar makes gold more costly and less appealing to international buyers.

However, there’s the possibility that the Fed Reserve could pivot towards the end of 2024 and actually begin to reduce interest rates – a theory shared by much of the market due to US headline inflation falling much faster than in countries like the UK where supply prices remain stubbornly high.

If this happens, then falling base rates in the US will actually curb the Dollar’s appeal for investors as returns will reduce for US Dollar deposits. This possible Dollar weakening could prove to be a catalyst for gold.

Inflation Expectations

What people expect inflation to do is really important for gold prices. It affects real interest rates and how much demand there is for gold as a way to protect against inflation. Inflationary pressures carried over from 2022, persisted in many regions during 2023. This was due to base effects, the economy reopening, imbalances between supply and demand, and higher prices for raw materials.

As we look to 2024, inflationary pressures may ease or continue to run high. This will hinge on the duration of these pressures, the fiscal and monetary policies implemented, and people’s inflation expectations.

Gold prices in 2024 could be affected by these factors. Specifically, if inflation is perceived as fleeting or sustained, resulting in a rise or fall of real interest rates, it could correspondingly lift or depress gold prices.

Global Political Risks

Global political risks are potent movers of gold prices. The rise in global uncertainties and downside risks has sparked a surge in demand for gold as a safe-haven asset. The year 2023 experienced relative tranquillity on the global political front.

While there were no significant new conflicts or crises, a few geopolitical issues and financial uncertainties did add to the global apprehension. These included the US-China trade and tech disputes, the Iran nuclear deal, North Korea’s missile tests, and the Russia-Ukraine border conflict.

Peering into 2024, the global political landscape could either maintain its calm or become more turbulent. This largely hinges on the outcomes of various elections, discussions, and events like the US midterm elections, the state of China-Taiwan relations, the progression of the Iran nuclear deal talks, and the global climate summit.

Depending on whether global political risks rise or fall, and if this triggers more or less demand for safe assets like gold, it could either inflate or deflate gold prices in 2024.

With general elections in both the UK and US towards the end of 2024, the need for current administrations in both regions to appeal to voters is likely to impact gold. Voter-friendly policies leading up to the elections, such as tax cuts, can influence the price of gold due to their effect on money supply, currencies and economies.

How Investors Feel

How investors feel plays a big role in gold prices. It changes the balance between supply and demand in the gold market. In 2023, investors had mixed feelings.

Some were buying gold to hedge against inflation and economic slowdown. But others sold gold to take profits or move to riskier assets.

In 2024, how investors feel could get better or worse. This will depend on what’s happening in the overall market, how other assets like stocks, bonds, and cryptocurrencies are doing, and the outlook for gold.

Depending on whether investors want more or less gold and whether they feel more or less confident about its future, they could either drive up or drag down gold prices in 2024.

Gold Price Predictions for 2024 From The Experts

Many sources and experts provide gold price predictions for 2024 based on different models, methods, and assumptions. Despite the current prices of gold, many investment banks continue to maintain a bullish gold price outlook. However, the central banks continue to bolster their gold reserves, highlighting the enduring appeal of the precious metal. In the following sections, we will discuss the gold forecasts from some of the most reputable and influential sources and experts:

• The World Bank
• Physical Gold
• The International Monetary Fund (IMF)
• JPMorgan Chase & Co.
• ABN AMRO
• Capital.com
• Goldman Sachs

The World Bank

The World Bank, one of the key players among central banks and a global financial institution offering loans and grants to developing nations for various projects, predicts an average gold price of $1,700 per ounce in 2024, a drop from $1,900 per ounce in 2023.

This forecast is built on assumptions about global economic growth, commodity prices, exchange rates, and inflation. Compared to other sources and experts, the World Bank’s forecast is slightly lower than the average consensus forecast of $2,100 per ounce for 2024 but higher than some other forecasts anticipating a steeper decline in gold prices.

Physical Gold

We expect the current holding pattern for the global economy to continue into 2024. The near-impossible central bank challenge of controlling inflation without causing a hard recession will be observed by investors from the sidelines. Therefore, we anticipate that gold’s price in US$ terms could close the year around the $2,000 mark.

However, with inflation coming down at an encouraging rate in the US while UK CPI remains stubbornly high, we anticipate a possible impact on UK gold prices. If the US monetary policy pivots during 2024 while UK interest rates continue to rise, we could see a strengthening of the Sterling against the Dollar, which would likely put the gold price under pressure for UK investors.

The International Monetary Fund (IMF)

The IMF, an international organization fostering global financial stability, economic cooperation, and sustainable growth, anticipates an average gold price of $1,775 per ounce in 2024, a slight decrease from $1,800 per ounce in 2023.

This forecast is based on projections of global economic activity, inflation expectations, and financial market conditions. Compared to other sources and experts, the IMF’s forecast is close to the average consensus forecast of $2,100 per ounce for 2024 but higher than some other forecasts that expect a more moderate increase in gold prices.

JPMorgan Chase & Co.

JPMorgan Chase & Co., one of the world’s largest and most influential banks, predicts the gold price to reach $2,175 per ounce in 2024, up from $2,000 per ounce in 2023. This forecast is based on their analysis of various economic and financial factors, including the US economic outlook, the Federal Reserve’s monetary policy, the US dollar strength, the inflation expectations, the geopolitical risks, and investor sentiment.

Compared to other sources and experts, JPMorgan’s forecast is higher than the average consensus forecast of $2,100 per ounce for 2024 and higher than most other forecasts that expect a moderate or a negative change in gold prices.

ABN AMRO

ABN AMRO, a Dutch bank providing various banking and financial services to retail, private, and corporate clients, has a gold prediction of an average price of $2,000 per ounce in 2024, a decrease from $2,200 per ounce. 

This forecast is based on its expectations of a stronger US dollar, higher real interest rates, lower inflation pressures, and weaker investor gold demand. Compared to other sources and experts, ABN AMRO’s forecast is much lower than the average consensus forecast of $2,100 per ounce for 2024 and lower than most other forecasts that expect a slight increase or a stable trend in gold prices.

Capital.com

Capital.com, an online trading platform offering access to various financial markets and instruments, expects a forecasted gold price of $2,150 per ounce in 2024, up from $2,000 per ounce in 2023. This forecast is based on its analysis of the technical and fundamental factors that could influence the gold price in 2024, such as the trend lines, the support and resistance levels, the moving averages, the Fibonacci retracements, the economic indicators, the market sentiment, and the supply and demand dynamics. 

Compared to other sources and experts, Capital.com’s forecast is higher than the average consensus forecast of $2,100 per ounce for 2024 and higher than most other forecasts that expect a moderate or a negative change in gold prices.

Goldman Sachs

Goldman Sachs, a leading global investment banking, securities, and investment management firm, has a positive outlook for the gold price in 2024. The firm’s analysts believe that the precious metal will trade higher than the market consensus in the near term, primarily due to its status as a safe-haven asset and the “fear” factor. This fear factor is driven by rising uncertainties, including banking and funding stress and the increased market-implied probability of a US recession in the next year. Goldman Sachs also cites the wealth effect, particularly the boom in income and savings in emerging markets like China and India, as a factor supporting gold prices. 

Considering these factors, Goldman Sachs predicts an average gold price of $2,133 per ounce in 2024. This forecast is higher than the average consensus forecast of $2,100 per ounce for 2024 and higher than most other forecasts that expect a moderate or an adverse change in gold prices.

Wrapping Up

Drawing from these expert insights, we anticipate a slight uptick in gold prices for 2024. The average cost could hover around $2,000 per ounce by year’s end. However, it’s crucial to note that this remains a forecast. Things can change, and there’s always a level of uncertainty.
For potential gold investors in the UK, it’s a good idea to have some gold in your portfolio to protect against inflation and geopolitical factors. But before you invest in gold, do your homework. Understand the risks and costs of buying and selling gold. And keep a close eye on market trends and conditions.