SCMP: 3 Reasons the Outlook for Gold Could Glimmer in 2024

Stock markets trended higher last year, closing 2023 at record highs. Many other assets also broke higher. Only one other asset saw a new record high. Gold.

The yellow metal has had some volatility in recent years. First, it soared during the pandemic. Then, prices moderated, even as inflation rose to its highest level in over 40 years. Last year’s trend higher could continue this year as well.

Several factors helped gold perform well last year. 2023 saw inflation moderate. But ongoing tensions across the world pushed gold higher. And demand remained strong, with central banks posting record purchases.

While inflation is coming down, the U.S. dollar could be on track to weaken against other currencies. That could push gold’s prices up in dollar terms globally.

Plus, rising debt burdens in general make gold a defensive asset to hold. The U.S. debt alone soared to $34 trillion last year amid one of the largest deficits in peacetime. With fiscal policy like that, gold could see more demand as a hedge against fiscal deficits this year.

And new mining supplies globally aren’t meeting today’s demand. That’s a classic recipe for rising prices for gold, even as the metal has hit new all-time nominal highs in recent weeks.

Meanwhile, gold ETFs have been liquidating their holdings as investors have looked for better returns elsewhere. If gold prices continue to trend higher, that trend may reverse, pushing prices up more quickly than expected.

To see the full factors at play in the gold market in 2024, click here.