India’s gold market has been hitting its peak for the past few months! Since the attack by Hamas on Israel back in October, gold has jumped up by more than 5%. And note this—since the beginning of the year, it’s gone up by almost 20%!
And all this war escalation has made the gold price shoot up. Analysts are buzzing about how India’s gold market might reach brand-new record highs. It seems like everyone’s eyeing gold as a safe bet with all these global events and the way the economy’s moving.
If you’re keen to explore what lies ahead for gold in the coming year, we have the right insights to guide you.
1. Inflation and US Currency: With inflationary expectations rising and the US currency weakening due to substantial fiscal and monetary stimulus, gold stands out as a premier hedge against inflation. This could potentially propel its prices to soar even in the coming years.
2. Economic Recovery in China and India: The gradual resurgence in consumer demand in key markets like China and India, coupled with gold as an investment in their economies, is bolstering the gold market, maintaining it at a robust level.
3. Digital Gold vs. Traditional Gold: The emergence of digital gold as an alternative to conventional gold has chipped away at its market cap. Yet, the bullish trend for gold is on the rise again, especially as Bitcoin cools off and market disruptions from the delta variant of COVID-19 stir interest in traditional safe-haven assets.
4. Central Bank Acquisitions: Major central banks from BRICS+ countries and beyond (such as Brazil, Russia, India, China, and new players) are aggressively purchasing gold, adding weight to the expectation of continued price surges.
5. Global political risks: Looking ahead to 2024, the future of global politics could sway either toward growing stability or increased turbulence. This outcome will significantly depend on the results of several key events, discussions, and elections, such as the US midterm elections, the evolving dynamics of China-Taiwan relations, progress in the Iran nuclear deal negotiations, and the outcomes of the global climate summit.
The fluctuations in global political risks and subsequent changes in the demand for safe-haven assets like gold, will be crucial in determining whether gold prices inflate or deflate throughout the year 2024.
6. The Federal Reserve money plans: As we step into 2024, the Federal Reserve might contemplate scaling back its asset purchases, possibly in the initial or subsequent quarter. This decision will be heavily influenced by the prevailing economic data trends and inflationary pressures at that juncture. Moreover, recent forecasts suggest a potential 25 basis point uptick in the main rate during the latter part of 2024.
Anticipating reduced stimulus and a rise in interest rates, such actions by the Fed could exert downward pressure on gold prices. However, if constantly high inflation persists and real interest rates remain in negative territory, it might serve as a supporting factor for gold prices.
Morgan Stanley Suggests ‘Time to Buy’
Morgan Stanley is a prominent global financial services firm known primarily for its investment banking, securities, wealth management, and asset management services. They have given investors the green light, signaling that it’s prime time to consider adding gold to their portfolio.
In a compelling observation, Morgan Stanley underlines the substantial surge in central bank gold purchases in recent years. They note that in 2022, central banks bought gold at a pace unseen since 1967, with 1,136 tonnes acquired. The trend continued strongly into this year’s first quarter, breaking records set in 2013, with 228 tons of gold purchased.
Gold holds a reputation among traders and investors as a long-term asset, making it particularly sensitive to shifts in interest rates. Over the last 25 years, Morgan Stanley highlights a pattern where the price of gold has surged by 10% for every percentage point decline in interest rates. Given the anticipation of the Federal Reserve initiating rate cuts in 2024, this pattern suggests a potential upward movement in gold prices.
The bullish sentiment towards gold isn’t confined to Morgan Stanley alone. Bank of America, as early as April this year, forecasted a bullish outlook for gold, predicting a record-breaking high of $2,200 by December. They urged investors to consider gold-focused exchange-traded funds (ETFs) as part of their investment strategy. This collective positivity from major financial institutions indicates a growing consensus on the potential profitability of gold as an investment, even in the year 2024.
Conditions are clearly working in gold’s favor. Many forecasts regarding India’s gold market indicate that gold prices and the value of gold will keep going strong without losing traction in the near future.
However, it is important to acknowledge that these projections are subject to change, and uncertainties persist. Prior to choosing gold as an investment, thorough research is key. Understand the associated risks and expenses involved in buying and selling gold. Continuously monitor market trends and conditions to make informed decisions.