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Gold Market: A Tale of 3 Factors That Will Drive Prices in 2024

INVESTINGGold Market: A Tale of 3 Factors That Will Drive Prices in 2024

The year 2023 brought a 13-percent increase in the American dollar price of gold, making it the best year since 2020. And since the start of 2024, the price of the precious metal has remained above 2,000 USD per ounce. But what can we expect in the upcoming months?

The price of gold is driven by demand for safe assets, which in turn depends on the state of economies, financial markets and politics. The year 2024 promises to be rather intense in this respect. Elections are coming up in many countries, including the USA and Russia, as well as Taiwan, which is also at the center of interest.

“Currently, the most pressing issues continue to be the war in Ukraine, tensions between the USA and China, and the ongoing high inflation. Therefore, many analysts and experts insist that the upward trend for gold prices will continue,” explains Michał Tekliński, a gold market expert from Goldsaver.pl.

The year 2024 will likely see a continuation of many trends that began in previous years, implying a good deal of unpredictability.

“Both the global and Polish economies face many challenges, although in the case of our country, there is a high chance that – as in recent decades – the worst will pass. Poland continues to fare relatively well compared to others,” adds Tekliński.

Three Factors that Will Influence the Price of Gold in 2024

According to experts of the gold market, the first factor that will drive gold prices in the upcoming months is demand from central banks.

“When it comes to gold purchases by central banks, last year was likely even better than the record-breaking 2022. After three quarters of last year, purchases were already 14% higher, and when results for the fourth quarter become available, this result should be even better. Nothing suggests that central banks intend to stop buying gold, mainly due to worries around the world and the still uncertain economic situation,” notes the expert from Goldsaver.pl.

Last year, 1/4 of the world’s central banks declared that they plan to buy gold within the next 12 months, and 2/3 of them will pursue a policy of increasing their reserves. China, which last year purchased more than 225 tons of gold, will likely remain the leader. Poland was also among the top buyers.

The second factor impacting the price of gold is the US Federal Reserve’s (FED) policy on interest rates.

“We know that the cycle of increases has ended, and FED has announced that in the near future we can expect cuts – three in 2024 and likely four in the following year. This implies that the American central bank considers the inflation situation manageable and needs to ensure the economy doesn’t enter a recession. Lowering interest rates reduces the attractiveness of other assets compared to gold, which in turn may lead to a rise in its price,” Tekliński explains.

The third factor influencing the market for the precious metal is the so-called January factor. This is an important month in terms of global demand as it marks the start of the new year in China.

“This signifies a huge interest in gold from citizens – in celebrating the new year, the Chinese buy gold as gifts or souvenirs. The People’s Bank of China also constantly buys gold, so global demand increases. We also see that ETFs, which last year were not particularly active in buying gold, started to establish long positions in gold at the end of 2023. Accordingly, we should expect that in 2024, ETFs will have a stronger impact on demand than last year,” the Goldsaver.pl expert predicts.

According to ING bank analysts, the average price of gold in 2024 will be 2,031 USD, and the average in the fourth quarter alone will rise to 2,100 USD per ounce. The analytical team of Wells Fargo bank goes further and forecasts 2,200 USD per ounce.

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