JPMorgan: The price of gold will remain high in 2024

The price of gold rose in the final months of 2023 on massive purchases by central banks and growing investor fears about the Israel-Hamas and Russia-Ukraine conflicts, according to an analysis by US investment bank JPMorgan Chase & Co ., which anticipates maintaining the upward trend in 2024 as well.

It notes that the decline of the US dollar and expectations of interest rate cuts by the Federal Reserve (Fed) further boosted the price of the yellow metal, which reached a record high of $2,135.39/ounce in December.

After a cycle of hikes that took Fed interest rates to their highest level in 22 years, US central bank officials have indicated at least three cuts in 2024 as inflation eases from 40-year highs seen at mid 2022.

Natasha Kaneva, head of global commodity strategy at JPMorgan, says: "Commodities overall are unlikely to benefit from core inflation in 2024. Inflation should fall below 3%. So, for the second consecutive year, the only optimistic perspective we have is for gold and silver".

According to the cited analysis, economic and geopolitical uncertainty tend to be positive factors for the evolution of the gold quotation, a metal widely seen as a safe, reliable asset.

"Among all metals, we have the strongest belief that the medium-term outlook is bullish for both gold and silver through 2024 and into the first half of 2025," said Gregory Shearer, head of metals strategy. core and precious within JPMorgan.

• Record high of $2,300/oz in 2025

The price of gold will peak at $2,300/ounce in 2025, according to JPMorgan Research estimates, which points out: "This prediction assumes a cycle of Fed interest rate cuts, which will drive the price of gold to new highs."

Gold price forecasts are based on the Fed's official estimates, which show core US inflation easing to 2.4% in 2024 and 2.2% in 2025, before returning to the 2% target in 2026.

JPMorgan economists forecast that by the second quarter of 2024, US GDP growth will slow to 0.5% (quarterly), which should prompt the Fed to start cutting interest rates in June.

According to JPMorgan, the average price of gold will be, in the first quarter of 2024, $1,950 an ounce, in the second quarter - $1,980 an ounce, in the third - $2,100/ounce, and in the last quarter, of 2,175 dollars/ounce. In 2025, the estimate shows a price of $2,225 an ounce in the first quarter, $2,275 an ounce in the second, $2,300 an ounce in the third quarter, and $2,275 an ounce in the last quarter.

"We believe the Fed interest rate cut cycle and the decline in US real yields will once again become the engine behind the gold price boom in the second half of 2024," Shearer added.

JPMorgan recalls that the world's central banks (led by that of China) purchased more than 800 tons of gold (net) in the first three quarters of 2023. The investment bank estimates that global central bank purchases in 2024 will reach 950 tons, with China remaining a significant buyer.

"There is still room for some central banks to increase their reserves as institutions seek to diversify their reserve assets," notes Shearer, adding: "Thus, gold purchases will likely remain high."

JPMorgan concludes that along with central bank interest, increased investor appetite in the physical gold market should also contribute to the dynamics of the profile market in 2024.