Gold Price Outlook 2024: Rate cuts, central bank buying, geopolitics, polls to fuel bigger rally than 2023

Gold Price Outlook: Gold had a stellar run in 2023, and the yellow metal is likely to shine brighter in 2024 as well. The reversal in monetary policy, buying by the central bank, safe haven sentiment amid geopolitical uncertainties, are among the factors that will cushion the prices of the bullion.

Monetary policy reversal

One of the key factors driving optimism in gold prices for the upcoming year is the expected interest rate cuts from the US Federal Reserve and the Reserve Bank of India. As 2024 will be a year of easing monetary policy, gold prices are set for fresh life-time highs, both in COMEX and the domestic MCX, according to Bhavik Patel, senior commodities analyst at Tradebulls Securities.

In the past, gold tended to rise when the US Federal Reserve began cutting interest rates. Expectations for Fed rates and gold prices usually move in opposite directions, as rising interest rates make other assets, such as the Treasury yields, more appealing. On the average, gold has seen an increase of 3.44 percent a month before the rate cut. The metal price rose 1.56 percent in three months after the rate cut, and 6.29 percent in six months after the rate cut.

Central bank buying and geopolitics 

Central banks influence gold prices by accumulating gold on dips. As global uncertainties continue to make investors nervous, central banks and traders across the world purchase the safe-haven bullion, increasing the war premium in the metal and driving up prices. “The ongoing geopolitical tension will continue next year, which will act as a cushion for gold prices,” said Jigar Trivedi, senior commodities analyst at Reliance Securities.

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The World Gold Council estimated that the central bank buying added around 10 percent or more to gold’s performance, and 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 450–500 tonnes) should provide an extra boost,” said the WGC.

A year of elections 

In 2024, as many as 70 elections are lined up across 40 countries, including India, the US, some European states and Taiwan. As a result, the WGC noted, the need for portfolio hedges will likely be higher than normal during the year.

Recapping performance in 2023

In 2023, gold prices surged 13 percent, giving investors remarkable returns and outperforming expectations. The safe-haven metal served as a strong asset for investors amid economic uncertainties and market fluctuations. February 5 gold futures on the MCX are trading at Rs 63,312 per 10 grams.

“Factors such as inflation concerns and geopolitical tensions contributed to the increased demand for gold, making it a standout performer in investment portfolios,” said Narinder Wadhwa, president of CPAI.

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Technical levels

For COMEX Gold, $2070 has been a vital supply zone, which was tested in December. However, it failed to sustain the level. If the metal trades above this level in 2024, it will open the door for the target of $2,250 per troy ounce, said Deveya Gaglani, research analyst for commodities at Axis Securities.

Additionally, on the MCX, analysts agree that the domestic prices might breach the Rs 70,000-per-10-gram level.

How should investors align their portfolios?

“Given the optimistic outlook for equity markets in the coming year, a balanced asset allocation strategy looks prudent. While maintaining exposure to equities and bullion or consider diversifying across other asset classes such as fixed income, real estate, and alternative investments,” said Wadhwa.

A diversified approach can help investors protect their portfolio by mitigating risk and remaining resilient in the face of market fluctuations.

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