5 Factors That Will Drive Gold in 2024

Gold has been one of the best performing commodities in 2023, up over 12% as the precious metal set a new all-time record high in late November. Traders like to say: “the trend is your friend” and in this case the trend points higher for gold. Here’s a look at five factors that will impact gold in the year ahead.

1. Geopolitical tensions boiling hot

From China-U.S. tensions to the Russian war in the Ukraine and the Israel-Hamas war in the Gaza strip, military and political hot spots are seen around the globe. What will the January presidential election in Taiwan bring and what could it mean for China’s desire to annex the island nation? Will Asia become another military flashpoint next year? Investors flocked to gold as war broke out in the Middle East in a traditional flight to safety. Increased geopolitical tensions in 2024 could open the door to another big upswing in gold.

2. Election year politics: a major uncertainty on the horizon

Presidential elections are always a source of market volatility. In 2024, we could see a more dramatic market impact, given that U.S. polarization is on the rise. At this point it appears that a rematch between President Biden and former President Trump is likely. But, a lot could happen between now and next November. Financial markets do not like uncertainty and just like the election in 2020, this presidential contest could be a nail biter that comes down to the wire. The greater the political uncertainty, the more risk for stock market volatility in 2024. Gold will benefit as the precious metal represents a long-standing safe-haven asset and ballast to portfolios.

3. The economy: soft or hard landing?

The economy will be a key driver for gold in 2024 as forecasts for slowing growth and potential for a mild recession will increase investor interest in gold as a hedge and portfolio diversifier.

While the stock market began pricing in a “soft landing” in December, which would mean a return to a 2% inflation rate without a recession, that is by no means a done deal. The Consumer Price Index (CPI) stood at 3.1% in November, an improvement from levels seen earlier in the year, but still above the Federal Reserve’s 2% target inflation rate.

Will there be a “hard landing” scare in early 2024 as GDP numbers weaken and inflation remains sticky? If yes, look for stocks to tumble and gold to climb. A number of Wall Street firms including bond giant PIMCO, Deutsche Bank, Vanguard, PNC and LPL Financial all expect a mild recession to emerge in the U.S. in 2024. Inflation and interest rates have been two major drivers of gold market performance over the past several years, and they will remain important in 2024.

4. Fed policy: rate cuts ahead

In December, the Federal Reserve started talking about interest rate cuts, suggesting the current monetary policy cycle has peaked with the federal funds rate at 5.25%-5.50%. Gold surged after the mid-December Fed meeting, when central bank officials suggested that they see three interest rate cuts in 2024. As higher interest rates typically compete with gold, which pays no interest, falling interest rate environments are historically positive for gold.

When interest rates fall, gold climbs. Looking into 2024, the falling interest rate environment will be a positive driver for gold and is a key reason many strategists expect gold to see new all-time highs in the $2,300-$2,400 region in the New Year.

5. Central banks: expect the buying spree to continue

Global central banks were voracious buyers of gold throughout 2023. Gold purchases from central banks are 14% higher through the end of the third quarter, versus the same time last year, the World Gold Council said. Peering into 2024, 24% of all central banks intend to increase their gold reserves in the next 12 months, as they increasingly grow pessimistic about the U.S. dollar as a reserve asset, a recent WGC survey said. This continued strong demand stream for gold will propel prices ever higher.

The bottom line

No economist or market analyst can accurately forecast what lies around the corner. Yet, prudent investors can capitalize on the uncertainty and take action to protect, preserve and grow their wealth with a diversified portfolio that includes an allocation to gold. We’re here to help.

Want to read more? Subscribe to the Blanchard Newsletter and get our tales from the vault, our favorite stories from around the world, and the latest tangible assets news delivered to your inbox weekly.