The price of Gold reached a new high in December 2023 and has continued to stay above $2,000 per ounce. Despite this, economists at HSBC are cautious about the outlook for the yellow metal.
While the general sentiment in the market is bullish, there are concerns that the price of Gold may be overextended and could potentially decline in the near term if there is no significant economic or political news. Additionally, the high price of Gold is dampening demand for jewellery, coins, and bars, particularly in price-sensitive emerging markets and even in less price-sensitive Western markets.
Historically, Gold has been sensitive to US real rates, and although there has been a notable disconnect in this relationship, there is a belief that positive real rates could pose a challenge for XAU/USD this year.
The potential for a USD rebound also presents a risk for Gold prices, but if the USD remains weak over the long term, it could be positive for Gold.
Despite these pitfalls, there are several underlying factors that could sustain the high price of Gold. Geopolitical and trade risks are anticipated to remain elevated in 2024, with 75 nations holding elections, providing support for Gold prices. Additionally, central bank demand for Gold remains strong due to geopolitical risks and portfolio diversification needs. However, it may not be fully sustained at price levels above $2,000.
Insight: It’s important to note that while the price of Gold has been historically high and there are potential pitfalls, there are also several contributing factors that could sustain this high level. It’s crucial for investors to monitor global events and market trends that could affect the price of Gold in the near future.
