Great excitement surrounded gold’s upshot, closing out 2023. Reasons for the move are said to be many including; Israel-Hamas and Ukraine-Russia conflicts, major central bank purchasing, and the highest Fed funds rate level in 22 years.
Ongoing economic and geopolitical uncertainty will continue to provide a positive driving force for gold prices while easing inflation and the recent announcement by the Federal Open Market Committee (FOMC) indicating plans to cut interest rates three times in 2024 are tending to neutralize the upward pressure. Nevertheless, gold (and silver) remain widely appreciated as a safe haven asset due to their ability to remain a reliable store of value.
Natasha Kaneva, J.P. Morgan’s Head of Global Commodities Strategy, said, “Commodities are unlikely to benefit from core inflation in 20214. Inflation should fall to under 3%, so that, along with properly timing the business cycle, are two conditions needed to initiate long positions, making the outlook for the sector very tactical in 2024…Across commodities, for the second year, the only structural bullish call we hold is for gold and silver.”
According to J.P. Morgan Research estimates, gold will rise and achieve $2,300/oz. in 2025 if the planned Fed cutting cycle is completed. It will also provide a better environment for business development and GDP increase, which is all helpful in upward pressure for precious metals.