Gold has gained significant attention over the past year as prices have surged to near all-time highs at the time of writing. Indeed, Costco (NASDAQ:COST) even entered the market, selling gold bars online.
Having surpassed $2,000 per ounce in November, gold prices are anticipated to rise in 2024, supported by robust safe-haven buying amid geopolitical concerns and a modestly weakened U.S. dollar, according to analysts. However, some experts suggest gold could stabilize in the coming year.
The World Bank Commodity Outlook noted an escalation of the Middle East conflict may lead to significantly higher prices, driven by heightened demand for safe-haven assets.
Predicting an increase in gold prices in 2024, research agency BMI, a unit of Fitch Solutions, cites anticipated investment flows into gold. The projection factors in a global growth slowdown from 2.6% in 2023 to 2.1% in 2024, a further weakening of the dollar, and a 50% probability of a shallow recession in the U.S., prompting potential rate cuts by the Fed.
With inflation concerns, gold became a popular hedge, offering portfolio diversification and long-term value. Despite fluctuations, experts weigh in on 2024 price predictions.
Gold and Inflation
Gold’s recent popularity and price surge are fueled by persistent inflation. Despite multiple interest rate hikes by the Fed, inflation remains above the 2% target. WisdomTree Investments forecasts ongoing high inflation, with a 3.1% rate at the start of 2024 and 2.60% by Q3. That sustained inflation trend may drive increased demand for gold and subsequently higher prices, echoing historical patterns seen in 1980 when gold reached a record $800 per ounce amid generational inflation.
Despite forecasts projecting gold to reach new highs next year, uncertainties persist. If economic conditions worsen, driving increased demand for defensive assets, gold prices could rise, offering potential upside beyond current predictions.
Geopolitical factors, such as conflicts and presidential elections, can also significantly impact gold prices. For instance, during the Israel-Hamas conflict in October, gold surged due to heightened geopolitical risks, reflecting its role as a safe-haven asset during times of uncertainty.
Additionally, the upcoming U.S. presidential election in 2024 is expected to maintain high retail demand for gold as investors seek to hedge against potential financial risks associated with a change in leadership.
Gold Forecasts for 2024
Economic uncertainties and geopolitical tensions suggest a 2024 rise in gold prices. Collin Plume, Noble Gold Investments founder, emphasizes gold as a vital portfolio hedge during downturns. WisdomTree forecasts steady 2024 increases, predicting $2,090 per ounce by Q3, with a bullish outlook for the yellow metal of $2,300.
Global gold prices surged to all-time highs this month, continuing a year-end rally. The World Gold Council’s 2024 outlook highlighted scenarios of a soft economic landing or a recession, both favoring higher gold prices. Uncertainty, global tensions and potential interest rate cuts contribute to strong gold demand.
Bank of America and Other Analysts Are Bullish on Gold
Anticipating declining yields, gold prices are predicted to rise further. FXEmpire suggests a potential major rally, projecting gold to reach $3,000 if it surpasses the psychological barrier of $2,100. Bank of America (NYSE:BAC) forecasted in April that gold could hit $2,200 by Q4, a prediction that may align with the ongoing rally.
Gold prices have surged from around $1,200 per ounce in October 2018 to today’s $1,874, marking over a 50% increase in five years. Although slightly lower than the 2023 peak, experts, including Alex Ebkarian, suggest the dip is likely temporary, attributed to increased bond yields and a stronger dollar.
Many analysts, including Sean Casterline from Delta Capital Management, believe the last few years have seen gold consolidating before a potential upward move.
With potential inflationary pressure from expansive fiscal policies and continued government and industrial demand, experts anticipate gold prices to rise in 2024.
Will the Gold Surge Last?
These forecasts indicate a lasting upward trend in gold prices is likely to be maintained. Reaching a record $2,071 per troy ounce on Dec. 1, gold prices rose in seven of the past eight weeks, posting a 12% year-to-date increase. The World Gold Council outlined three economic scenarios for next year, with only one seeing an expansion without growth slowdown, posing a 5% to 10% chance of reducing gold prices.
More probable scenarios are a soft landing, with a 45% to 65% likelihood, keeping gold prices steady with upside potential, or a recession, with a 25-55% chance, leading to notably higher gold prices.
Invest in Gold in 2024
Historically, gold has appreciated, making it an opportune investment amid geopolitical instability, inflation and high interest rates. However, it’s essential to note that gold is generally seen as a safeguard rather than a source of substantial short-term returns.
According to Ebkarian, due to gold’s mid to long-term nature, it’s advisable to adopt a “buy and wait” strategy rather than trying to time the market. Gold’s scarcity, unlike the dollar, makes it a finite asset. Experts suggest allocating no more than 10% of your portfolio to gold for a well-diversified investment approach.
While not guaranteed, indications suggest a potential increase in gold prices next year. Investors contemplating gold investments might consider acting promptly to capture potential short-term returns before prices climb further.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
