The current record high gold prices in the U.S. can be attributed to several key factors, according to Portfolio Manager Ima Casanova. These include expectations of a potential rate cut by the Fed, safe haven buying due to global geopolitical risk, and strong central bank purchases of gold. Additionally, the outlook for gold prices in 2024 and beyond is positive based on these factors.
Central banks are stocking up on gold in order to diversify their foreign reserves away from the U.S. dollar, which has contributed to a record level of gold purchases in 2022 and continued strong purchases in 2023. This increased demand from central banks is supporting the price of gold.
Looking ahead to 2024, Casanova is bullish on gold prices, suggesting that it has established a strong support level around $1,900 to $2,000 per ounce. She predicts that gold could potentially test and exceed the all-time highs set in 2020 and more recently on December 4th, 2023. The gold equities market is also anticipated to benefit from sustained record high gold prices.
Casanova also points out that gold mining companies are producing gold at all-in sustaining costs averaging $1,300 per ounce, providing them with healthy margins and ample cash production. This is expected to lead to improved share price performance as they remain disciplined in their pursuit of growth.
One potential risk to this outlook is the potential for a slow down in the U.S. and global economies under the strain of high interest rates and geopolitical tensions. However, Casanova sees gold as being well-positioned to benefit from these risks as they become more visible to the market.
Additional insight:
Gold has historically been viewed as a safe haven asset during times of economic uncertainty and geopolitical instability. The current global geopolitical risk and potential economic slowdown, combined with expectations of a rate cut, create a favorable environment for gold. Furthermore, central bank purchases have increased, indicating a broader trend of diversification away from the U.S. dollar. As a result, gold is poised to maintain its strong position and potentially reach new highs in the coming years. However, investors should be aware of the inherent volatility and risks associated with investing in gold and gold-related assets.
