Economic Jitters, US Rate Speculation Lifts Gold To Record – Reactions

Editorial Staff

1 January 2024

The possibility that the US Federal Reserve might trim interest rates around mid-2024, coupled with geopolitical and global financial worries, helped to boost the price of gold to rise over $2,100 per ounce, up from around $1,800 a year ago.

Gold rose to all-time highs overnight against every major currency except the Swiss franc.

That said, apart from Asian central banks and Western hedge funds playing in the yellow metal, the bullish move in gold is not a “crowded trade,” according to Adrian Ash, director of research, , said the environment is friendly for gold.

“In our 2024 base case outlook for gold, gold may see a potential trading range between $1,950/oz and $2,200/oz and our bull case suggests gold may see a potential trading range between $2,200/oz and $2,400/oz in 2024,” he said.

“Gold’s trajectory in 2023 surprised many investors as the yellow metal remained resilient against traditional macroeconomic headwinds. Gold rallied past a previous all-time high set during the Covid-19 pandemic on Monday (4 December 2023), driven by growing expectations that the Fed may need to cut interest rates in the first half of 2024,” Tsui said. “Last Friday, the US two-year Treasury yields sank to their lowest level since June as markets are projecting the possibility of `higher for longer’ lasting through June 2024 down near-zero (2.9 per cent) probability,” he continued.

“Markets are currently projecting a 43.3 per cent chance of two 25 basis point cuts by June. On the economic front, US manufacturing activities remained subdued (PMI unchanged at 46.7) in November, the 13th consecutive month that the PMI stayed below 50; US factory employment declining further as hiring slowed and layoff increased, while US consumer spending rose moderately in October. Moreover, the latest annual increase in inflation (PCE at 3 per cent year-on-year) was the smallest in more than 2.5 years, showing further signs of cooling demand that bolstered expectations cut its outlook for Chinese sovereign bonds to negative from stable, highlighting global worries about debt burdens in the world’s second-largest economy.