With interest rates expected to go down, investors could swiftly move back into the gold market as demand for safe-haven assets is expected to grow, according to one bank.
In a recent interview with Kitco News, Bernard Dahdah, precious metals analyst at Natixis, said he is relatively bullish on gold ahead of 2024 as expected lower interest rates create a positive environment for the precious metal.
Currently, the French bank’s official gold forecast is for prices to average around $2,080 an ounce next year; however, Dahdah said that under current circumstances, his forecast could be seen as outdated.
“From what I can see, the odds are better for gold in 2024 than in previous years,” he said.
While lower interest rates, pushing bond yields down, will be a healthy bullish factor driving gold prices, Dahdah said that investors shouldn’t ignore the precious metal’s role as a safe-haven asset and monetary metal.
As the decades-long globalization trend continues to fade, Dahdah said that he sees more nations and central banks diversifying away from the U.S. dollar and moving into gold. He added that nations like China are nowhere near done increasing their reserves.
At the same time, Dahdah said that investment demand, driven by these global safe-haven trends should also provide solid support for the precious metal.
“I don't think it will be a perfect storm for gold, but elements are aligning that should make 2024 an interesting year, and why I can see gold prices comfortably higher,” he said. “
Dahdah’s outlook for gold highlights a broader trend in the marketplace according to Natixis’ 2024 investment survey. According to the French bank, investors see geopolitical uncertainty as the biggest risk for the global economy, surpassing inflation fears from 2023.
“While inflation was your main concern six months ago, geopolitics have now become your main risk ahead of inflation, central banks’ policies and a crash of real estate,” the report said.
Geopolitical fears are not expected to dissipate anytime soon. The Natixis survey noted that investors expect geopolitical uncertainty to dominate markets for the next five years. At the same time, investors see climate change and high public debt tied for second place as the most significant long-term risks for the global economy.
Dahdah noted that it’s difficult to see geopolitical tensions easing anytime soon as nations try to develop their own domestic supply chains and chase dwindling resources.
“It’s difficult to see a world with less friction as we move further away from global economic integration,” he said.
While safe-haven demand is expected to provide solid support for gold, the spark that will ignite a sustainable rally higher remains central bank rate cuts. Natixis expects both the Federal Reserve and the European Central Banks to ease rates in May or June, in line with the bank’s survey results.
