Gold Mid-Year Outlook 2024: What It Means for Gold Investors?

Key Takeaways

• Gold has been one of the top-performing assets worldwide in 2024.
• Global gold reserves increased by 290 metric tons in Q1-24.
• There has been a notable increase in demand for gold from central banks.
• Western gold ETFs have seen renewed interest following recent rate cuts, suggesting a potential upward trend in gold investments.
• Rising geopolitical tensions have historically supported gold prices, making it a valuable asset for hedging against uncertainty.

Gold’s Impressive Performance in 2024

Current Performance: Gold has surged by 12% year-to-date (YTD), making it one of the top-performing assets globally in 2024.

Key Drivers: The rise has been driven by central bank gold reserves, strong investment flows from Asia, resilient consumer demand, and ongoing geopolitical uncertainties.

Why It Matters: Understanding gold's strong performance and its drivers helps investors gauge its stability and potential for future gains.

Recent Economic and Market Trends of Gold

Global Economic Context: Economic growth indicators are showing signs of weakness, and inflation remains persistent, creating an environment where rate cuts are anticipated.

Gold Price Stability: Given current market expectations, the spot price of gold is expected to remain relatively stable in the short term, but several factors could influence future movements.

Why It Matters: Being aware of these trends allows investors to anticipate market movements and make informed decisions about the timing and extent of their gold investments.

Gold Investors See Record High Gold Prices Achieved In 2024

YTD Growth: Gold is up by 12% in USD, outperforming assets like global treasuries, US bonds, and commodities.

Record Highs: Gold has broken record highs multiple times between mid-March and mid-May 2024, trading above $2,300/oz for most of Q2-24.

Why It Matters: These metrics highlight gold's resilience and potential for high returns, making it a strong candidate for investment.

Central Bank Activity’s Increased Demand for Gold

Purchases: Central banks have continued to buy gold, with a notable contribution from emerging markets.

China’s Role: The People’s Bank of China (PBoC) has slowed its purchases recently, which could impact future demand and prices. Between 2022 and 2024, the PBoC steadily increased its spot gold reserves for 18 continuous months, an increase of 316 metric tons or 16%, before abstaining from buying in May and June 2024.

Why It Matters: Monitoring central bank activity helps investors understand major market influences and anticipate shifts in gold demand and price.

Western Investor Influence

Exchange Traded Fund: Western gold Exchange Traded Funds (ETFs) have seen net outflows YTD, but recent rate cuts by the European Central Bank (ECB) have spurred inflows.

Potential Impact: Further rate cuts, particularly by the US Federal Reserve System (FED), or Bank of England (BoE), could boost Western investment in gold.

Why It Matters: Recognising the role of Western investors provides insight into potential price increases driven by renewed interest and investment flows.

Impact of Geopolitical and Economic Factors on Gold Price

Geopolitical Risks: Rising geopolitical tensions have historically supported gold prices. For every 100-point increase in the Geopolitical Risk (GPR) Index, gold prices can rise by approximately 2.5%.

Recession Risks: Although immediate recession risks are low, the global economy’s under-performance and inflation concerns make gold an attractive safe haven.

Why It Matters: Understanding these factors helps investors appreciate gold's role as a hedge against geopolitical instability and economic downturns.

Asian Market Dynamics

Investment Patterns: Chinese and Indian investors have significantly influenced gold demand through bar and coin purchases and ETF inflows.

Recent Trends: A spike in gold volumes in Shanghai futures markets in early Q2-24 coincided with a price rise, driven by positive sentiment from central bank buying.

Why It Matters: Keeping track of Asian market trends enables investors to gauge additional demand factors and potential price movements.

Consumer Demand and Market Reactions

Jewellery & Technology: These sectors make up over 40% of annual gold demand. Economic growth and stable prices are crucial to sustaining this demand.

Price Sensitivity: Consumers, especially in markets like India, are sensitive to price volatility. Stable gold prices could attract more buyers.

Why It Matters: Awareness of consumer demand trends helps investors understand the broader market dynamics that influence gold prices.

Advice for Gold Investors

Monitor Central Banks: Keep an eye on central bank policies, especially the PBoC, as their purchasing patterns significantly impact gold prices.

Watch for Rate Cuts: Anticipated rate cuts by the US Fed, BoE and ECB could drive further investment in gold.

Stay Informed on Geopolitics: Rising geopolitical tensions often lead to higher gold prices as investors seek safe-haven assets.

Consider Market Trends: Recognise that while gold has shown strong performance, potential shifts in market conditions could present new opportunities or risks.

Why It Matters: These strategic insights help investors make informed decisions, optimise their gold investment strategy, and respond to changing market conditions.

Our Thoughts

Gold’s mid-year outlook for 2024 remains cautiously optimistic. With a 12% rise YTD and the potential for further gains driven by Western investment and geopolitical factors, now is a good time for investors to possibly consider gold.

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