Gold News

Gold Price Hits 6-Month Dollar High on 2024 Recession and Fed Rate-Cut Forecasts

The GOLD PRICE rose to another new 6-month high against a weaker US Dollar on Tuesday even as Western stock markets trimmed their steep November gains in the face of rising long-term borrowing costs in the bond market.
Previously rising over 10% so far this month despite the geopolitical turmoil around Israel's invasion of Gaza in response to Hamas' terrorist atrocities of 7 October, the tech-heavy Nasdaq pointed 0.2% lower as the MSCI World Index of rich-economy stock markets stalled at its highest since early August.
The gold price in Euros touched 3-week highs above €1846 while the UK gold price in Pounds per ounce briefly edged above £1600 for the first time in a week.
Rising to $2025 per Troy ounce, the price of gold in US Dollar terms meantime held on track for a third successive afternoon close in London above $2000.
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First breaching $2000 in August 2020 amid Covid, the price of gold managed a 5-day stretch that month of fixing above that level at the London PM auction, the global benchmark price.
Gold then fixed above $2000 just once after Russia invaded Ukraine in early 2022, before recording a 7-day stretch this April and then a 9-day $2000 gold stretch in May as the mini-crisis in regional US banking shares saw a jump in expectations that the Federal Reserve would cease and then start reversing its run of interest-rate hikes.
Chart of Dollar gold price vs. end-2023 and end-2024 Fed Funds interest rate forecasts from the futures market. Source: BullionVault
Betting on the direction of Federal Reserve interest rates today kept the odds of a further rise from the US central bank's current 2-decade highs at almost 1-in-10 for January, with betting on the first cut coming in May slipping to a 50-50 shot.
But the end of next year will see Fed rates more than 0.8 points lower from today, says the market consensus shown on the CME derivatives exchange's FedWatch tool, and "the risk of a hard landing for the economy is higher-than-expected," reckons US financial giant Bank of America's chief investment strategist Michael Hartnett.
Tipping bullion and bonds for investors in 2024, Hartnett expects "bearish investor positioning" in stocks, "recessionary corporate profits and easing [interest-rate] policy" to drive gold prices higher as longer-term borrowing costs fall.
"The potential upside in gold prices will be closely tied to US [interest] rates and Dollar moves," adds a new 2024 outlook from US investment bank Goldman Sachs, "but we also expect persistent strong consumer demand from China and India, alongside central bank gold buying to offset downward pressures from upside growth surprises and rate-cut repricing."
Prices for gold in Shanghai – the only legal entry point for bullion into China, the precious metal's No.1 consumer market – today showed a $35 premium to London quotes, holding far above the historical average incentive for new imports of $8 per ounce.
Hong Kong jewellers Luk Fook (HKG: 0590) says its sales rose over 30% year-on-year in the 6 months to October, with profits rising by over 40% and "mainly attributable to continuous improvement in sentiment in the retail markets of Hong Kong and Macau following the full reopening of borders" with the Chinese mainland following the abandonment of Covid lockdowns.
China's No.1 jewellers Chow Tai Fook (HKG: 1929) last week reported 6% sales growth with a 36% rise in profits.
But after a strong Diwali, and "while India's gold demand has been solid so far in 2023," says a column at Reuters today, "it appears that some momentum may be coming out" of the precious metal's 2nd largest consumer market as Rupee gold prices track global quotes higher again, with local dealers having to offer discounts to the official, tax-and-duty inclusive import price of $6 per ounce last week despite the upcoming Hindu wedding season.
With 6 members of the US Fed's policy-team due to speak later today, Christine Lagarde – head of the 20-nation European Central Bank – said Monday that she remains "determined" to bring inflation down to the ECB's 2.0% annual target, both by keeping Eurozone interest rates higher for longer and by bringing forward the end of government bond purchases under the central bank's €1.7 trillion pandemic QE program.
Silver also rose with the gold price, retouching Monday's 3-month Dollar highs above $24.80 per Troy ounce.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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