The Gold Rush Effect Reappears! Bullish on Gold Prices Setting New Records in 2024

As the Federal Reserve implements a tightening policy, marking one of the fastest interest rate hike cycles in history, and considering the economic growth and inflation data showing signs of slowing down, CPT Markets analysts optimistically predict that the Federal Reserve will quickly initiate interest rate cuts in the face of an economic slowdown. Regarding the outlook for the first quarter of this year, in addition to being bullish on U.S. stocks, they also have a positive attitude towards mature market government and corporate bonds. They recommend investors to include gold in their portfolios as an important hedging tool.

To provide readers with a clearer understanding of the 2024 asset allocation strategy, the analyst explains the following implications:

1. While bond investments can reduce risks and provide fixed income, investors should be aware that the "ongoing issue of rising U.S. debt" remains unresolved. Higher bond yields will put some pressure on the overall economy, leading to an increase in default rates for non-investment grade credits. Therefore, investors are advised to focus on mature market government bonds and investment-grade corporate bonds.
2. Including gold in the investment portfolio is a wise move. With interest rates already high, a weakened U.S. dollar, and escalating geopolitical risks, gold demonstrates characteristics of being a good hedging tool. It is expected to benefit from strong central bank buying support and show a stable bullish trend.

So, what factors could lead to a bullish trend in gold prices in 2024? Below, CPT Markets analysts will explain in detail the factors driving the gold into a bullish trend.

With inflation pressures easing, the job market trending towards balance, and the ISM manufacturing index consistently below the 50 thresholds for 13 consecutive months, the possibility of the Federal Reserve raising interest rates again is minimal. Here, the analyst mentions a key point: "The future interest rate cuts in the U.S. are closely related to the trend in gold prices." Based on past experiences, once interest rate cuts are initiated, real interest rates are expected to decline rapidly, leading to better performance for gold. In other words, one of the important factors predicting a rise in gold prices is the expectation of the future policies of the Federal Reserve. In addition to the mentioned factors of interest rate cuts, economic and geopolitical tensions are also reasons for the rise in gold prices. This is mainly because gold has a reliable store of value and lower correlation with other asset classes, making it a safe-haven asset in the market.

Furthermore, the actions of central banks worldwide in 2024 will be a major focus of the gold price market. While central bank purchases of gold may not directly boost gold prices, this move will continue to play a crucial role in the market, supporting the overall upward trend in gold prices. Looking back at 2023, central banks worldwide net-purchased over 8 million gold in the first three quarters, setting a new record since the World Gold Council began collecting such data. Especially at the end of September, China's official gold reserves reached 2,191 tons, an increase of 26 tons from the previous month, marking the tenth consecutive month of gold accumulation.

In recent years, several countries and regions have witnessed an accelerating trend towards de-dollarization in the official reserve currency structure. Despite the U.S. dollar still holding about a 50% share of the global settlement currency, the inevitable trend of "de-dollarization" has become apparent in the medium to long term. This shift will gradually push up the gold prices denominated in dollars, considering the decline in U.S. strength and credibility, as well as the global shift towards multipolarity, regionalization, and polarization.

In conclusion, CPT Markets analysts estimate the medium to long-term trend in gold prices, anticipating that the global central bank purchasing volume this year is likely to surpass 950 tons, exceeding the level of the same period in 2022. This will further boost demand to historically high levels. Considering the geopolitical tensions between Ukraine and Russia and the large-scale competition among 152 countries' central banks dedicated to "de-dollarization" by purchasing gold, combined with the overall decrease in gold ETF holdings since mid-2022, it is expected that as the interest rate cut cycle begins, investors will readjust their portfolios, potentially having a positive impact on gold and supporting an upward trend in gold prices in 2024.