Gold Price Outlook – January 2024

“Gold Price Outlook
Gold prices are expected to rise over the course of 2024. That said, over the next few months, the path of least resistance for gold prices may be to the downside.

Like various other markets, gold too has come down from the high levels reached in December 2023. The increases in various asset prices during the last quarter of 2023 were driven by market expectations of a larger than likely reduction in interest rates during 2024. The Fed is open to cutting rates in 2024 based on how the economy evolves. The markets have run ahead of themselves in pricing roughly twice as many rate cuts than the Fed said it may execute this year if warranted by weaker economic trends.

Last year, not only did gold prices rise to record high levels on an annual average basis but prices also touched fresh records for the intraday high, low, and close prices as well. This year gold prices are projected to rise roughly 5% on an annual average basis to a fresh record high of $2,047.

Prices could touch fresh intraday levels as well. But before prices rise higher, they are expected to head lower. Seasonal strength in prices and Chinese demand ahead of the Lunar New Year on 10 February 2024 should help to hold gold prices up over the next couple of months, but downside pressures exist. During the first quarter of the year gold prices could retest $1,995 and a decline toward $1,975 cannot be ruled out depending on a range of political and economic developments that may emerge in the weeks and months ahead.

Beyond this initial phase of profit taking and correction from the excesses of the last quarter of 2023, the price of gold is expected to rise. Gold prices are expected to rise on a combination of healthy demand from both central banks as well as investors.

Central banks played a very important role in not only supporting gold prices during 2023 but also helping to push prices higher. These entities that have typically pulled back from making fresh purchases in a high price environment bought a large volume of gold on a net basis even as gold prices reached a record high on an annual average basis.

Investors were also interested in adding gold to their portfolios as a hedge against both political as well as economic risks. These risks are likely to become greater as 2024 progresses, which could boost increased interest from investors. Central banks too are expected to be net buyers of gold during 2024. While it is possible that central bank net purchases during 2024 are somewhat lower than those seen in 2023, similar levels in net purchases as those seen 2023, during 2024, should not be ruled out as central banks continue to diversify their reserve assets.

Insofar as central banks may buy less gold this year than they did last year, it primarily should be viewed as a result of private investors buying more gold, bidding the price higher. Private investors are less sensitive as a group to higher prices than are central banks. If investors step up their net gold purchases in 2024 as CPM expects, the resulting higher prices may be reflected in somewhat lower central bank demand.”