Gold expected to move much higher in 2024, could touch Rs 70,000

Gold saw a steady rise in 2023, closing the year 12 per cent higher and with the ongoing geopolitical crises, risk assets like the yellow metal will stay vulnerable to escalations. As such, investors can expect a structural risk premium to get embedded in gold prices, said Officer, Quantum AMC in a note.

"Gold can be a useful asset to hold in 2024. As interest rates peak and timing and extent of rate cuts remain uncertain, it can provide opportunity for markets to speculate, creating volatility across asset markets, including gold. Markets can oscillate between optimism and pessimism creating wild short-lived swings in gold prices on either side. Use these swings wisely to build your allocation to gold which can benefit from the eventual turn in Fed policy, that is now a given at some point next year," said Ghazal Jain, Fund Manager, Alternative Investments, Quantum AMC.

Commtrendz Research Director Gnanasekar Thiagarajan, expects gold to rise to $2,400 in 2024 and if the rupee is stable it could hit Rs 70,000 levels. Gold is currently hovering at Rs 62,939 per 10 grams.

"We expect an eventual rise to $2,400 in 2024, and if the rupee is to be stable, gold is likely to reach around Rs 70,000 levels. As India faces elections, the rupee could weaken as Foreign Institutional Investors (FIIs) are expected to lighten up their portfolios, which could further bolster domestic prices for gold," he was quoted as saying by PTI.

As per a report by Emkay Wealth Management titled ‘Navigator’, the price of gold is expected to test levels from  $2060 to $2090, and on any correction, if 2035 holds, the prices may target the 2115 level in the current up-move.

"The geo-political developments are crucial for the markets as the demand for US Dollar assets, and therefore, of US Dollar, in the immediate term, will be determined by some of these exogenous factors. The rise in US rates was the factor that prevented any upside for gold or rather limited it for almost one year now despite the high global inflation," noted the report. 

The yellow metal has boomed from the lows seen in the last six months to levels above $2000, and currently, it is perched at the $2050 level. The boom was possible with the depreciation of the US Dollar against other currencies, and the fall in the Dollar Index, both of which were possible due to the market’s perception that the US interest rates and more specifically the US official rate policy could turn soft very soon, the report said. 

Brokerage ICICI Securities expects MCX gold to rise towards 63,600 in the near term.

"Gold prices are likely to rise towards $2080 mark, as long as it holds above the $2055 on the expectation of softness in the dollar index. An increasing probability of rate cut in 1 st quarter of 2024 would support the bullions to hold its bullish outlook. Further, expectation of contraction in the manufacturing activities in US would also support the billion to trade higher," said Pankaj Pandey of ICICI Securities. 

The precious metal saw a large up move at the start of 2023 in response to stress in the US banking system which triggered global risk aversion and expectations of a Fed pivot. But over the next few months, sticky US inflation and strong labour market data fuelled the Fed’s hawkish stance pushing gold prices lower. Fresh geopolitical tensions in the Middle East, slowing inflation and concerns about a US economic slowdown in the last few months of the year brought with them renewed expectations of peak interest rates and softer monetary policy, pushing prices higher. In its final meeting of the year, the US 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 US dollar, propelling gold above the $2000 mark.

"Since 2020, there have been one black swan event after another, like the pandemic, Russia-Ukraine war, Israel-Hamas war, debt crisis; these have built-in the risk premium in gold. Geo-political tensions always stimulate the safe haven appeal of gold and silver prices, these two assets always post a sharp rally during the times of uncertainty or panic," noted brokerage Motilal Oswal in a note.

Central banks bought 800 tonnes of gold in the first three-quarters of calendar year 2023 providing soft support to prices through the volatility of the year.In 2022, global central banks purchased a record 1,136 tonnes of gold, compared to 450 tonnes bought in 2021, mostly driven by a flight towards safer assets amid soaring inflation, In fact 2022.was not only the thirteenth consecutive year of net purchases, but also the highest level of annual demand on record back to 1950.

While global gold ETFs saw net outflows, domestic gold ETFs saw net inflows of Rs 2,831 crores year-to-date as of November 2023. 

"Adverse impact of geopolitical developments on supply chains and commodity prices will keep inflation sticky at higher levels, probably above the comfort level of central banks. Similarly, the deglobalization trend which is underway post the pandemic is also expected to keep costs of goods and services elevated. Appeal for gold, which is considered a store of value can be expected to increase in response. The de-dollarisation trend to diversify away from the US dollar, fuelled further by ongoing geopolitical risks, will keep pressure on the dollar and help gold. We expect strong central bank gold demand to act as a soft support for gold prices as it did in 2023," said Chirag Mehta, Chief Investment Officer, Quantum AMC.