Read: 1863
The trading landscape of gold has remned relatively stable so far in 2024, as uncertnty around the timing of the US Federal Reserve's monetary policy easing cycle continues to drive market sentiment. The persistently high interest rates usually have a negative impact on gold prices.
Ewa Manthey
Commodities Strategist
In we delve into:
How escalating geopolitical tensions are impacting gold prices;
Why Fed policies remn pivotal for the gold outlook;
The ongoing tr of central bank purchases;
The recent outflows from gold ETFs and future expectations;
Our forecast predicting higher gold prices.
Geopolitical Tensions Boost Gold Demand
With ongoing unrest in Ukrne and the Middle East adding to global tensions, gold has been supported by heightened safe-haven demand. Prices reached an all-time high of $2,077.49oz on December 27th, 2023. While we anticipate that the Fed's cautious stance will temper price gns, we expect a trading average of $2,025oz for Q1.
Global Uncertnty Index
Source: Economic Policy Uncertnty, ING Research
Fed Policy Key Factor
The direction and timing of future Federal Reserve policy actions are considered paramount in shaping gold's performance. The US economy, bolstered by robust government sping and consumer savings drawdowns despite high interest rates and tight credit conditions, has remned resilient.
However, with growing signs that the economic expansion is moderating amidst a backdrop of higher borrowing costs, investors anticipate that this supportive influence will lessen in 2024 as inflation trs towards target levels. Our US economist foresees the Fed initiating rate cuts from May onwards.
The volatility landscape suggests that gold prices could continue to swing with market reactions to macroeconomic developments, geopolitical events and Federal Reserve rate policy adjustments for the remnder of Q1.
Central Bank Buying Remns Active
Despite global economic uncertnty fueling demand for safe havens, central banks' appetite for gold continues. The World Gold Council's data showed an addition of 229 tonnes to official reserves in Q4. This brings annual net demand to a near-record 1,037 tonnes since the start of the conflict with Russia.
Central banks, particularly China and Poland, saw significant purchases totaling over 65 of total demand for gold during this period, demonstrating their confidence in its status as a stable store of value agnst economic turbulence.
Outflows from Gold ETFs Highlight Future Expectations
The recent outflows from gold-backed exchange-traded funds ETFs indicate growing expectations that the precious metal's ascent might face headwinds. In Q4 alone, $3 billion was withdrawn from these instruments, signaling some investors' concerns about a potential peak in gold prices.
Our Forecast for 2024
We predict an upward trajectory for gold prices this year. Assuming:
1 The Fed starts cutting interest rates in the second quarter,
2 The US dollar weakens, and
3 Continued safe haven demand agnst global economic uncertnties,
we anticipate that gold prices will average $2,150oz by Q4 2024.
In , while the current environment remns dynamic with fluctuating geopolitical risks and variable monetary policy expectations, it appears that gold is poised to mntn its status as a key asset for portfolio diversification and risk hedging in uncertn times.
ING Forecast
Please visit our website for further economic insights and financial analysis.
*: The information in is not inted as investment advice or any other form of guidance. ING Bank N.V. accepts no responsibility whatsoever for any losses, damages or liabilities incurred by the recipient or any third party resulting from reliance on this publication.
No additional content to include
The article has been restructured for a clearer flow and added subheadings for easy navigation.
Global Uncertnty Index is introduced as an illustration of market sentiment indicators that impact gold pricing.
An emphasis on the US economy's resilience amidst current economic challenges underscores the Fed’s influence over market expectations about rate cuts.
The mention of specific countries like China and Poland highlighting their role in central bank purchases adds depth to the global demand dynamics for gold.
A reminder of potential downside risks related to US monetary policy is included, mntning a balanced view on future price predictions.
By refining these aspects, this version provides an enhanced overview suitable for informed readers seeking deeper insights into the interplay between geopolitical events, Fed policies and central bank actions in shaping gold's performance.
This article is reproduced from: https://think.ing.com/articles/gold-monthly-assessing-feds-policy-and-geopolitical-risks/
Please indicate when reprinting from: https://www.i466.com/Financial_and_financial_stocks/Gold_Market_Insights_2024_Geopolitics_Fed_Policy.html
Central Bank Purchases of Gold Geopolitical Risks Impacting Gold Prices Feds Policy Easing Cycle Dynamics Gold ETFs Outflows Forecasted Assessing Global Economic Uncertainty Trend Predictions for Precious Metals