Will gold prices hit another all-time high?

Gold prices surged in the last few months of 2023 after a powerful rally was sparked by central bank purchasing and mounting investor concern over the Israel–Hamas and Russia–Ukraine conflicts. A falling U.S. dollar and expectations of Federal Reserve (Fed) rate cuts further boosted bullion prices, which hit a record high of $2,135.39/oz in December.

After a hiking cycle that pushed the Fed funds rate to its highest in more than 22 years, policymakers on the Federal Open Market Committee (FOMC) have indicated at least three rate cuts in 2024, as inflation eases from the 40-year highs seen in mid-2022. With gold prices hovering around $2,000/oz, is another bullish run expected for the precious metal as rates begin to fall?

“Commodities are unlikely to benefit from core inflation in 2024. Inflation should fall to under 3%, so that, along with properly timing the business cycle, are the two conditions needed to initiate long positions, making the outlook for the sector very tactical in 2024,” said Natasha Kaneva, Head of Global Commodities Strategy at J.P. Morgan. “Across commodities, for the second consecutive year, the only structural bullish call we hold is for gold and silver.”

Economic and geopolitical uncertainty tend to be positive drivers for gold, which is widely seen as a safe-haven asset due to its ability to remain a reliable store of value. It has low correlation with other asset classes, so can act as insurance during falling markets and times of geopolitical stress. A weaker U.S. dollar and lower U.S. interest rates also increase the appeal of non-yielding bullion.

Anticipation has played a key role in sparking the rally in gold’s price, as it is influenced by market expectations of future Fed policy.

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