High interest rates and recession fears will boost the metal's value
Gold prices are headed for a record high in 2024 as monetary policy eases in the US and while recession worries will highlight its role as a safe haven investment.
On August 7, 2020, spot gold prices had touched a record high of $2,072.5/oz, a point which is very likely to be surpassed in the coming months. “I expect gold (currently at $1,919 an ounce) to move above $2,100 in late 2023, early 2024,” the executive director and chief commodity strategist at TD Securities told CNBC , Bart Melek. He attributed this assessment to the possibility of an end to the cycle of monetary policy tightening by the US Federal Bank (Fed). “I am bullish on gold because I believe the Fed will move away from the current tightening phase. I believe this will happen before the 2% inflation target is reached,” he added.
The Fed began raising rates in March 2022, when inflation was climbing toward a 40-year high in the US. In less than two years, the prime lending rate range has reached between 5.25%-5.5%.
Over the past twelve months, gold has outperformed most other major asset classes data, as it tends to “resist” rising interest rates and is considered a “shelter” against inflation.
Some are even more bullish on gold, expecting it to even reach $2,500 by the end of 2024, at least 26% above current levels. “My target is $2,500 by the end of 2024 … This is largely due to the fact that there may be bearish pressures towards the end of 2023, which will intensify in 2024,” David Neuhauser, founder of Livermore Partners. “2024 is where I see gold hitting new highs.” He stated that he expects stagflation in the international economy in the coming years, when inflation will fall between 3%-5%.
It is noted that gold tends to rise during times of economic uncertainty, such as recessions and stagflation, due to of its status as a reliable investment, while it is often used as a hedge against inflation. “Any kind of bearish move would be positive for gold,” commented Randy Smallwood, managing director of Wheaton Precious Metals. only after the second quarter of 2024. “A key factor in our bullish outlook for gold is the expected peak in the Fed's monetary policy tightening cycle, as well as the peak of US dollar momentum,” said Heng Kun Hao, senior bank executive. He estimated that gold will reach $2,100 per ounce in the second quarter of 2024.