In CY2024, will gold mirror the decent 12% gains of last year?

Gold has been preached as a good bet for uncertain times, and likewise, if you missed last year’s decent gains, here is a take from experts on how the yellow metal may fare this year. 

But first and foremost, we will understand how and what moved gold prices in 2023

Chirag Mehta, CIO, and Ghazal Jain, Fund Manager at Quantum Mutual Fund, noted that the year saw major ups and downs, and in the process, gold saw a decent run-up of around 12 per cent. The experts believe that as the Fed’s peak aggressiveness was left behind, gold saw a notable price rise.

“In its final meeting of the year, the Fed took a dovish stance, maintaining the status quo on rates and signalling 75 basis points of rate cuts in 2024, up from its previous projection of 50 basis points. This triggered a substantial drop in US treasury yields and the US dollar, propelling gold above the $2000 mark, noted the experts.

As of January 10, gold prices are still ruling well above the $2000 per ounce mark at $2033.3 in international markets, while on the MCX, gold futures February contract is trading at 62,270 per 10 gm.

What are the likely triggers that can erode or advance gold prices going forward?

Deepak Gagrani, Founder of Madhuban Finvest, is of the view that an interplay of catalysts, including geopolitical shifts, economic conditions, central bank strategies, yield curve dynamics, dollar movements, and the supply-demand matrix, will be at work, which will influence gold’s trajectory in 2024.

“Escalation of any ongoing geopolitical conflicts can instigate a flight to safety, driving increased demand for gold as a hedge against uncertainty.  Unpredictable events occurring at regular intervals since 2020, such as the pandemic, the Israel-Hamas war, the Russia-Ukraine war, and the bank debt crisis, have heightened the risk premium associated with gold," the expert noted.
Experts from Quantum Mutual Fund opined that as US economic data shows incremental signs of cooling off, the deterioration in US growth is expected to become apparent in the first two quarters of 2024. 

Both the US slowdown and the resulting Fed easing are likely to make conditions conducive to gold prices in 2024, as the attractiveness of competing asset classes diminishes.

How should investors approach gold investments in 2024?

Experts suggest that as the timing and extent of rate cuts remain uncertain, markets can oscillate between optimism and pessimism, creating wild, short-lived swings in gold prices on either side. Investors can tap these swings wisely to build their allocation to gold, which can benefit from the eventual turn in Fed policy.
Gagrani sees the initial crucial benchmark would be surpassing the high of US$ 2136 set in 2023. Achieving closure above these levels would signify that gold has entered uncharted territory, potentially setting sights on targets around USD 2300/2400 levels. In INR terms, this will translate to close to INR 70000/10 gm.