Metals Focus: Gold Price to Average US$2,250 in 2024, Setting New Record

Bullish on gold, but near-term pullbacks likely

Metals Focus notes that gold has reached record highs this year despite traditional headwinds, including a strong US dollar and a lack of interest rate cuts from the US Federal Reserve.

Instead, other elements have fueled its momentum, such as looming debt in the US, along with the upcoming election. With both presidential candidates expected to continue with deficit spending, investors are looking for a safe haven.

On a global level, uncertainties over the recovery of the Chinese economy have been driving more investors toward gold. Additional support has come from continued central bank buying, led by Turkey, China and India.

Geopolitics has also played a part in the relative strength of gold in 2024. Metals Focus notes that while conflict tends to have only a short-lived effect on gold, the possibility of a deeper regional conflict developing in the Middle East could have implications on oil supply and trade routes, and may well factor into investor sentiment.

Though Metals Focus still thinks near-term corrections are likely as investors take profits, it believes the downside should be limited as investors who have been waiting on the sidelines look for opportunities to enter the market.

Slight gold surplus expected in 2024

In terms of supply and demand, Metals Focus is forecasting a slight imbalance for gold in 2024.

Last year brought a gold surplus of 212 MT, and this year the firm said that amount is set to double.

Contributing to this imbalance is a 3 percent increase in mine supply, with all regions except Oceania and Europe expected to see gains. Ghana is predicted to see the highest growth rate as Newmont’s (TSX:NGT,NYSE:NEM) Ahafo mine and AngloGold Ashanti’s (NYSE:AU) Obuasi mine increase their production. Meanwhile, Shandong Gold Mining’s (SHA:600547) Namidini mine is due to come online in the fourth quarter of 2024.

Metals Focus also says Canada is expected to see a production boost as several new mines ramp up to steady-state operations throughout the year, including IAMGOLD (TSX:IMG,NYSE:IAG) and Sumitomo Metal Mining's (TSE:5713) Côté gold mine in Ontario. Additional volume is expected from a number of mine expansions as well.

On the demand side, jewelry fabrication is anticipated to fall 2 percent in 2024, consuming 2,242 MT of gold. The drop has been attributed to a number of factors, chiefly the higher gold price and economic uncertainty, which is constraining discretionary spending. However, according to Metals Focus, the fall from those sources will be slightly offset by gains in the Indian market as its economy remains strong and customers are willing to buy despite rising gold prices.

Meanwhile, heavy losses in the US and Europe are forecast to pull physical investment down by 3 percent, to 1,170 MT, as investors take profits on the back of record prices. Gains in Southeast Asia and East Asia are not predicted to be large enough to alleviate the declines. Physical investment in gold is also expected to fall in the Middle East, most notably in Turkey, where higher local prices are driving a shift to alternative assets.

Metals Focus is expecting central bank purchases to remain high through 2024, at similar levels to 2023, with the majority of countries that made bulk purchases in previous years continuing to diversify their portfolios and work toward de-dollarization goals in the face of ongoing geopolitical uncertainty.