Gold prices escalated considerably in 2023, surpassing the $2,000 mark. This was largely attributed to a correction in the dollar and US treasury yields. The adjustment was seen following the decision by the US Federal Reserve to pause their rate hike campaign and suggest potential rate cuts in 2024. Moreover, the steady rise in prices was buoyed by central bank purchases and the escalation of geopolitical tensions.
A report by ICICI Direct states that Gold prices are anticipated to move towards a new high of ₹70,000 driven by a weak dollar and a decline in US treasury yields. The report also highlighted that the concerns over slower global economic growth and the escalating geopolitical tensions in the Middle East may continue to make gold valuable as a hedge against uncertainties. It is expected that central banks will persist in their buying spree to diversify their reserves.
Currently, the price of gold stands at ₹63,060 per 10 grams on the MCX commodity stock exchange and approximately $2,058 per ounce in the global market. The rise in prices was further bolstered in December, as global tensions in the Middle East mounted and the prospect of interest rate hikes had apparently come to a close. Global central banks purchased nearly 337 tonnes of gold in Q3CY23, the second-highest third quarter on record. It is noted that total gold ETF holdings have declined in 2023 due to rising interest rates, which diverted investors’ attention from gold. However, it is predicted that fresh investment demand may emerge in 2024 with a weakened dollar and expectation of rate cuts across major economies.
The report further touches upon the outlook for silver prices in 2024, suggesting that they are also expected to increase considerably due to the market remaining in deficit for the third consecutive year. The global silver market is projected to see another deficit in 2023, marking the third consecutive year.
It is expected that a market deficit of around 140 million ounces will be observed in 2023. The decline in the physical investment demand in 2023 is believed to be compensated by fresh investment demand in the coming year, further driven by the weakening dollar and heightened safe haven demand. Moreover, the escalation of geopolitical tensions in major economies is anticipated to instigate investment in silver as a store of value.
Additional Insight: Gold and silver are both seen as safe-haven assets, often sought by investors during uncertain times. When geopolitical tensions rise, as well as the anticipation of interest rates and exchange rates fluctuating, there is often a surge in demand for both precious metals, which in turn increases their prices. Therefore, given the current global economic climate and the potential for a period of uncertainty ahead, it is anticipated that gold and silver prices will remain on an upward trajectory in the near future.
