Unusually consistent gold price predictions from experts across many investment banks indicate a bullish outlook for gold prices this year.
Every January around the world crystal balls are dusted off as experts publish their predictions on everything from coffee harvests to snowfall to litigation. As a key safe-haven investment, gold price forecasts are always keenly watched, and 2024 looks to be a strong year for the precious metal. Many of the experts point to three main drivers of gold growth, namely the expectation of lower interest rates, continued geopolitical tensions in the Middle East and Russia, and demand from central banks. After a record 2023 , most experts are predicting another bumper year for the gold price in 2024.
J.P. Morgan – Gold price to rally in second half of 2024
Investment Bank J.P. Morgan expects gold to reach $2,175 by the end of 2024, before rising to $2,300 in 2025. Initially, the bank sees gold retreating from recent highs while interest rates remain elevated, but the US Federal Reserve (Fed) is expected to start cutting rates later in the year. After rapidly raising rates between 2022 and 2023 in an effort to cool rampant inflation, central banks around the world are now looking to lower rates as inflation has eased. The cuts will come on the back of slower economic growth forecasts for 2024, as policy-makers cut rates to encourage people to borrow and spend, stimulating the economy again.
When interest rates are lowered, the interest or returns on savings accounts and bonds is lowered, and this increases the appeal of gold which doesn’t pay interest at all. The opportunity cost of gold (the potential benefits that an investor gives up by choosing to invest in gold instead of other financial assets) decreases when interest rates fall, encouraging investors to turn to yellow metal.
“Across all metals, we have the highest conviction on a bullish medium-term forecast for both gold and silver over the course of 2024 and into the first half of 2025, though timing an entry will continue to be critical,” said Gregory Shearer, Head of Base and Precious Metals Strategy at J.P. Morgan.
Alongside the imminent rate cuts in the US and rising geopolitical tensions, central banks will likely continue to buy gold, supporting demand for gold this year, the bank said.
“Led by China, central banks have purchased more than a net 800 tonnes of gold in the first three quarters of 2023. J.P. Morgan Research estimates global central bank purchases for the year will hit 950 tonnes, with China remaining a significant steady buyer. This will exceed the amount purchased over the same period in 2022, which resulted in record demand.”
UBS sees 10% upside to gold price
Investment bank UBS’s gold expectations follow a similar logic to J.P. Morgan. Over the course of the year, interest rates are expected to start going up, and that will underpin the gold price. The bank expects the price to rise to $2,250 by the end of the year despite near-term volatility.
UBS echoed other investments banks that have based their forecasts on the expectation that rate cuts from May will “put pressure on the US dollar and real interest rates, which should spark fresh demand, particularly from exchange-traded gold funds”. The bank also pointed out that geopolitical risks are another good reason to diversify or hedge with gold.
ING Bank sees new record highs for gold
ING Bank believes gold will hit fresh highs in 2024, after already setting new records in late 2023. The gold price hit a record of $2,135.40 on 4 December last year, when markets speculated that the Fed could start cutting interest rates early in 2024. While the price has retreated from those heady days as interest rate cuts edge further out, it was still above $2,000 an ounce in January. ING believes the gold price could hit fresh highs this year and predicts it will average $2,100 in the fourth quarter.
ING’s forecasts are predicated on familiar expectations – Fed rate cuts in the second quarter, a weaker dollar, more geopolitical uncertainty spurring safe-haven buying, and continued strong demand from central banks.
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World Gold Council bets on Central Bank support
The World Gold Council, an organisation that represents the gold industry and collects data on demand and supply of the precious metal, said in its annual gold outlook research that Central Bank buying and geopolitical tensions may provide support for the gold price in 2024. The WGC Gold Outlook 2024 presents a variety of scenarios depending on how the economy fares, and how that could affect the gold price. If the economy contracts (recession) gold tends to rise because people look to put their assets in a safe-haven investment while markets are volatile. If the economy grows, gold may coast along with little growth as investors seek returns elsewhere.
Whatever the actual performance of the economy in 2024, the World Gold Council believes there is support for gold from the volatility caused by geopolitical tensions and more Central Bank demand. Last year the WGC estimated that excess central bank demand added 10% 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, we anticipate that any above-trend buying (i.e. more than 450–500t) should provide an extra boost.”
A chorus of bullish gold price predictions
It’s unusual to find such consonance among gold experts because there are so many factors that can influence the price of the precious metal. But investment analysts at many large banks agree that the outlook for gold in 2024 is good. Even with prices touching all-time highs as recently as last month, they still see room for more growth.
Saxo Bank said: “We maintain a bullish outlook for gold into 2024 in the firm belief that rates have peaked, and that Fed funds and real yields will continue to trend lower.” Meanwhile Bank of America said that gold could reach $2,400 per ounce in 2024 if the Fed cuts rates in the first quarter.
The main driver of this optimism is the expectation of rate cuts. But there are many other factors that could contribute to higher gold prices, including a falling dollar, geopolitical tensions and central bank buying. When all the crystal balls are saying the same thing, it’s probably time to listen.
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