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Plenty of value in gold as WisdomTree forecasts $2,285 by Q1 2024

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(Kitco News) - Shifting interest rate expectations is creating renewed volatility in the gold market as prices struggle to push back to $2,000 an ounce; however, according to one market strategist, this volatility is creating a buying opportunity for investors looking for value in the precious metals market.

In a recent interview with Kitco News, Nitesh Shah, head of commodity research at WisdomTree, reiterated his stance that any price below $2,000 remains an attractive entry point for investors as he expects gold prices to be much higher a year from now.

He added that he expects gold prices to push to $2,285 an ounce by the first quarter of 2024, representing a new all-time high for the precious metal. WisdomTree's outlook comes as gold prices last traded around $1,975 an ounce, roughly unchanged on the day.

"Gold prices are elevated compared to last year, but it still looks cheap compared to where we see it going," he said. "There is still plenty of value at current prices."

Last month gold saw a solid drop through $2,000 an ounce as the relatively healthy economic sentiment continued to support the Federal Reserve's aggressive monetary policy stance. Markets have all but priced out most of the rate cuts it was expecting through most of April.

However, in recent weeks, gold has held critical support at around $1,950 an ounce as expectations have shifted once again. Many analysts and economists have noted that the Federal Reserve is inching closer to the end of its tightening cycle. Markets expect the Federal Reserve to leave interest rates unchanged when it meets next week, and there is only a 53% chance of another rate hike in July.

Shah said that although interest rates can continue to increase, gold investors have less to fear as every new rate hike pushes the global economy close to a recession. He added that while the economy has been reasonably resilient, the threat of a recession has not entirely disappeared.

Shah said that central banks have never successfully engineered a "soft landing" for the economy and are unlikely to do so in this tightening cycle.

"I'd love to be able to believe in a soft-landing scenario, but there's something inside me that makes me doubt that that's achievable. They're just too focused on the inflation part of the equation."

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Shah also noted that central bankers and politicians are putting too much emphasis on the labor market, which is not as healthy as it looks. He said the labor market isn't tight because of robust economic growth. Systematic demographic issues, exacerbated by the COVID-19 pandemic, have created market tightness, he said.

"To be able to bring inflation down to target levels, central banks may just have to cause a good-sector recession to counter the impact of the structural change in the labor market pushing up service prices," he said. "It's going to be painful for a whole host of people. From that standpoint, having a portfolio hedge in terms of gold may just be a prudent way of navigating what has become a slightly more complex economy."

As to what will get investors back into the gold market, Shah said it will probably take a full-blown recession to drive investment demand in earnest as equity markets fall. He added that because a recession has been telegraphed for so long, investors won't be convinced it is happening until they are in the midst of it.

However, Shah said that investors shouldn't wait for the recession.

"Now is the time to prepare your portfolio. The time to move in is not at the time of the risk event but is before the risk is realized," he said.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.