Why gold prices are likely to reach a record high in 2024

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Gold prices finished higher on Thursday despite the Federal Reserve’s hawkish stance on monetary policy, as analysts looked to a “confluence of factors” poised to lift prices for the metal back to, and beyond, a record high.

The latest announcement by the U.S. central bank sent “ripples” through the gold market, said Adam Koos, president at Libertas Wealth Management Group.

Gold futures fell by as much as 1% to as low as $2,046.40 an ounce on Comex overnight. The April contract
GCJ24,
-0.45%
then traded as high as $2,083.20 — not far from the $2,093.10 record-high settlement for a most-active contract reached on Dec. 27, FactSet data show. April gold on Thursday settled at $2,071.10 an ounce, up $3.70, or 0.2%.

Federal Reserve Chair Jerome Powell on Wednesday squashed expectations that the central bank would begin cutting interest rates in March.

The Federal Open Market Committee is taking a more “patient approach to keep [interest] rates higher for longer,” tempering hopes for a rate cut sooner rather than later, said Peter Spina, president of GoldSeek.com.

He said the underlying strength in the gold market is fueled by central-bank buying.

In a report released on Wednesday, the World Gold Council said central-bank purchases of gold maintained a “breakneck pace,” with annual net purchases of 1,037 metric tons almost matching the 2022 record — falling just 45 metric tons short.

Central banks have been “hoarding gold like treasure hunters, with their insatiable appetite helping to bolster gold prices, despite strong headwinds” such as surging bond yields and a “ridiculously” strong dollar, according to Koos.

Gold futures have settled above the psychologically important $2,000 level consistently since about mid-December.

Spina said gold is “solidly on the launch pad” and expects gold prices to make a move in the coming months to fresh record highs.

“You couldn’t tell from general-sentiment indicators that gold is near all-time record highs,” but that’s “typical of stealth gold-bull moves,” he said, with futures prices little-changed from where they ended last year.

Stealth gold-bull moves take place “quietly, with the excitement phase of the bull run coming later as we move solidly into record-price territory,” said Spina.

He expects those shorting the gold market to “see their dreams of a larger price-drop fade and instead … turn into short-covering ammo for the bulls,” with “many triggers for the gold price to take off.”

Koos listed a “confluence of factors” that will likely lift gold to a fresh all-time high later in the year — including likely easing by the Fed, a weakening dollar, and sustained safe-haven demand “amidst global economic uncertainties that never seem to go away.”

Expectations that the Fed would soon be cutting rates contributed to gold’s record-high settlement in late December, but analysts have also looked to the rise in safe-haven demand for the precious metal against a backdrop of war, particularly in the Middle East.

“Geopolitical tensions and conflicts are spreading. Risks are growing, and this has been translating into many BRICS nations adding more and more gold reserves,” Spina said.

Additionally, demand for gold from China remains strong and is expected to strengthen as Lunar New Year celebrations near.

China — which is gold’s top miner, importer, central-bank buyer and household consumer — always marks the Lunar New Year with a surge in gold jewelry and investment demand, said Adrian Ash, director of research at BullionVault. The Chinese New Year begins on Feb. 10, with celebrations lasting up to 16 days, according to Chinesenewyear.net.

“China’s surging gold demand shows no sign of letting up,” Ash said in emailed commentary this week.

He noted that gold priced in the Chinese yuan currency
USDCNY,

has gained 44% since the eve of the COVID-19 pandemic and rose by one-fifth last year. Additionally, China’s household gold demand jumped 24% in U.S. dollar terms to a record $56 billion in 2023, he added.

Ash said the Year of the Dragon is likely to see a fresh record in terms of Chinese Lunar New Year demand. Gold is considered a sign of good fortune and is commonly purchased as gifts for the holiday.

Western investors who want a dip in the gold price to start adding to their own bullion holdings “could well get an opportunity” when the Shanghai market shuts on Feb. 9 for China’s weeklong Spring Festival holidays, Ash said.

Looking further ahead, he said it’s hard to see gold prices falling too far this year.

The bullion market is finding strong support above $2,000 from “relentless central-bank demand, spurred by today’s dreadful geopolitical tensions, plus China’s massive household demand, driven by its poor financial and economic outlook,” according to Ash.

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