PART II of the 2024 Gold Forecast Series

Market Trends and Trajectories

Wall Street Trends

2023 was a challenging year for Wall Street. While the first six months looked promising, investors had to contend the Fed’s ‘higher for longer’ rate policy, volatility in the bond market, oil price shocks, rising global risks, uneven corporate earnings and a U.S. consumer that continued to spend but was quickly running low on savings and amassing debt. The Dow Jones Industrial Average was down just over 2% going into Q4.

While some analysts are bullish on stocks for 2024, others urge caution. A recent USA Today article outlined the following potential market pitfalls:

Unfortunately, while the U.S. economic outlook improved significantly in 2023, there are still warning signs of a recession in 2024. In addition, some market experts have raised concerns over the bloated valuations of Big Tech companies that have led the market to rebound in 2023. The 2024 U.S. presidential election could create volatility in the stock market, particularly given how unpopular both leading candidates are among American voters. In addition, sticky inflation could force the Federal Reserve to maintain interest rates at 22-year highs longer than anticipated, potentially pressuring growth stock valuations.¹

Gold has been historically resilient during Wall Street bear markets, corrections, and crashes.

Dollar Outlook and De-Dollarization

The value of the US dollar was strong through 2023 mostly fueled by rising interest rates, U.S. job growth, and China and Europe’s economic instability. Many analysts, however are predicting the dollar will depreciate in 2024 due a “shifting interest rate landscape” as outlined in a recent Benzinga report:

The [dollar] outlook could change approaching next year. The consensus among around 70 foreign exchange strategists is that the dollar will begin to weaken slightly against most major currencies. This change is expected to coincide with the Federal Reserve initiating interest rate cuts. ‘In the next six to nine months, we are expecting the Fed to start to cut rates, and it’s at that point where we think that the dollar will reweaken again,’ said Lee Hardman, senior currency analyst at MUFG.²

Other experts claim that the dollar is near its peak with nowhere to go but down. Indeed, a Bloomberg report from late October suggests a weakening appetite for the greenback citing strategists at Barclays Plc and Morgan Stanley who claim the dollar is “stretched.”³ And let’s not forget the looming threat of de-dollarization coming from China which in 2023 led all other countries in gold buying in an effort to shrink its dollar reserves. Since gold is priced in dollars, when the buck falls — the price of bullion tends to rise.

Gold Demand and Prices

Central bank gold buying maintained an historic pace in 2023 according to the World Gold Council. In their Gold Demand Trends Q3 2023, the industry organization reported that central bank net buying of gold was 14% ahead of 2022:

Central banks have bought a net 800t of gold so far this year, the highest on record for that nine-month period. While there is a nucleus of committed regular buyers, the range of countries whose central banks have added to their reserves over recent quarters is broad-based.⁴

Gold’s appeal is on the rise among U.S. consumers as well. According to a Gallup poll, the perception of gold as the “best” long term investment nearly doubled since 2022, rising from 15% to 26%. Gold has now overtaken stocks in the survey and is now only second to real estate among consumers looking for to hold an asset for a year or more.

How far has gold’s appeal increased with everyday Americans? One need to look no further than the recent rush to buy gold 1 ounce gold bars at Costco which were selling out within hours, despite only being available to members online.⁵ Due to crushing demand, Costco struggled to keep the bars in stock and had to limit bar purchases to just two per customer. The Costco gold rush, according to experts, stems from a feeling of overall uncertainty which gold seems to alleviate. That feeling of uncertainty looks unlikely to diminish as we enter 2024.

1. https://www.usatoday.com/money/blueprint/investing/stock-market-outlook-2024/ ↩︎
2. https://www.benzinga.com/markets/forex/23/09/34552711/u-s-dollar-strong-in-2023-but-could-it-weaken-in-2024 ↩︎
3. https://www.bloomberg.com/news/articles/2023-10-31/dollar-usd-peak-looks-near-as-trade-looks-crowded-and-fatigued ↩︎
4. https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q3-2023 ↩︎
5. https://www.usatoday.com/story/money/business/2023/10/03/costco-gold-bars-online-member-price/71043206007/ ↩︎