Gold on record 50-day streak above $2,000 per ounce, though rougher waters loom

Gold prices have not closed below $2,000 per ounce for 50 days, easily outshining the precious metal's 14-day streak in May 2023, its previous best run.

In recent years, $2,000/oz has proven a tough barrier to break, with gold only briefly closing above that level a few times since it first passed the mark in 2020. Gold hit a record-high closing price of $2,079/oz for 2023 on Dec. 27, and the price has come off that high but stayed above $2,000/oz since the start of the year. The price climbed again in late January and closed at $2,060/oz on Feb. 1. Central bank purchase trends and geopolitical uncertainty will contribute to high gold prices in 2024, industry observers said, though anticipated volatility could take gold's trading range back below $2,000/oz.

Gold markets are likely to be volatile in 2024 but the price will average an estimated $2,010/oz for the first quarter and $1,996/oz for the entire year, S&P Global Commodity Insights analyst Aude Marjolin wrote in the latest SNL Article report, released Jan. 31. Monetary policy and geopolitical uncertainty are two significant drivers of gold demand, and investors in the metal will watch both closely in 2024.

"Along with the two major wars between Russia and Ukraine and between Israel and Hamas, the recent attack on a US base in Jordan by an Iranian-linked drone threatens to widen the latter conflict and potentially involve the US in the Middle East," Marjolin wrote. "Moreover, with an uncertain picture regarding inflation as disrupted trade counters expected slower GDP growth, and then further down the road, the US presidential election, 2024 has the hallmarks of a volatile year for gold prices."

Central banks have been purchasing gold at higher than historical rates: Central bank demand reached 1,037 metric tons in 2023, just 45 metric tons from the record high set in 2022. The World Gold Council expects central banks to continue buying gold "at an impressive rate," likely above the pre-2022 average of about 500 metric tons per year, according to the trade group's quarterly demand report published Jan. 31.

In 2023, central banks nearly matched their record year of buying in 2022, the World Gold Council noted. The industry group wrote that they "believe that a longer-term strategy is at play" and that central banks will likely have another solid gold-buying year in 2024, even if it does not rise to the record or near-record levels seen in the past two years.

"I think the central bank demand, and I think the systemic events that continue to develop, whether they're banking crises or political risk, geopolitical risks ... those are the elements holding the price firm on the floor," said Joe Cavatoni, North American market strategist for the World Gold Council. "Even with people paring back on the demand in investment, particularly [exchange-traded funds], it's not material enough, and it's not severe enough to push the price down."

Trends could shift

In HSBC Global Research's 2024 gold outlook released in early January, the group raised its 2024 price forecast to $1,947/oz from $1,850/oz, with its 2025 forecast increasing to $1,835/oz from $1,725/oz. Jim Steel, chief precious metals analyst for HSBC Global Research, projected a broad trading range of $1,825/oz to $2,200/oz for gold in 2024. The daily closing price of gold spanned a relatively wide band in 2023, including a low of $1,810/oz on Feb. 24.

Steel wrote in HSBC's forecast that expectations of interest rate cuts in 2024 fueled the price rally through 2023, but the analyst added that gold could backtrack if those cuts do not materialize.

"Gold is historically sensitive to real rates, and while there has been a significant disconnect in this relationship, we expect real rates to weigh on gold as 2024 unfolds," Steel wrote.

Steel said that the US dollar is also likely to bounce back in 2024, further pressuring the price of gold.

Annual gold demand excluding over-the-counter (OTC) markets totaled 4,448 metric tons in 2023, down 5% from 2022, the World Gold Council said in its recent report. However, when factoring in what the organization categorizes as "OTC and other" markets, demand hit a new annual record of 4,899 metric tons. The "OTC and other" category captures the remaining difference between supply and demand to account for more opaque sources of demand. Continued buying in OTC markets will likely add uncertainty to the market in 2024 as well, the group wrote.