According to strategists at ABN AMRO, the price of gold in US Dollars could be set to ease slightly to $2000 in 2023, before rallying in value to $2200 in 2024.
Of course, one of the biggest advantages to include gold in your portfolio is to hedge against inflation.
Despite a rally of over 10% this year, the price of gold may face limited upward movement from its current position against the US dollar, suggests Georgette Boele, Senior FX & Precious Metals Strategist at ABN AMRO.
"This year gold prices have rallied by more than 10% versus the US dollar. A weaker dollar and expectations that the Fed hiking cycle will come to an end soon are the main reasons behind its strength," says Boele.
Yet, the gold strategist indicates that this rally might not be sustainable in the short term, as market conditions could push prices down before they rebound.
"We think that the upside is limited from current levels. In fact prices could even fall back to 1.900-1.950 before heading higher again," she adds.
Boele points to the anticipation of Fed rate cuts starting in the third quarter as a factor currently reflected in gold prices.
XAU/USD Outlook for the Remainder of the Year: 2023
Although the Federal Reserve's easing is anticipated to begin by the end of this year, Boele suggests that this may occur later than expected, combined with a modest recovery of the dollar, leading to lower gold prices.
"We think that rate cuts will come later and that the easing will only to start at the end of this year. We also expect a modest recovery of the dollar in the coming months," says Boele.
The analyst believes that these factors will not result in a trend change, but rather a temporary dip in gold prices.
Gold Prospects for 2024
Looking further ahead, Boele holds a positive outlook for gold prices in 2024.
The analyst predicts that monetary policy easing by the Federal Reserve, European Central Bank, and Bank of England will narrow the rate differences between the US dollar, Euro, and Pound Sterling versus gold, which is traditionally considered a zero-interest-rate asset.
"Monetary policy easing by the Fed, ECB and BoE will be a positive for gold prices in 2024 as the rate differences between USD/EUR/GBP versus gold (zero interest rate asset) narrow," says Boele.
However, the strategist implies that the impact might be less significant than when interest rates were considerably lower, as a substantial spread in favour of these currencies is expected to persist.
"Our new year-end forecasts are 2.000 for 2023 and 2.200 for 2024," she adds.
This projection indicates a long-term bullish outlook for gold despite potential short-term setbacks.
Outlook Overview
While gold has enjoyed a strong rally this year, near-term headwinds could lead to a temporary dip before a potential rebound.
The anticipated easing of monetary policies by major central banks in 2024 is expected to support gold prices, although the impact may be tempered by persisting rate differences favouring traditional currencies.
Of course, one of the biggest advantages to include gold in your portfolio is to hedge against inflation.
Despite a rally of over 10% this year, the price of gold may face limited upward movement from its current position against the US dollar, suggests Georgette Boele, Senior FX & Precious Metals Strategist at ABN AMRO.
"This year gold prices have rallied by more than 10% versus the US dollar. A weaker dollar and expectations that the Fed hiking cycle will come to an end soon are the main reasons behind its strength," says Boele.
Yet, the gold strategist indicates that this rally might not be sustainable in the short term, as market conditions could push prices down before they rebound.
"We think that the upside is limited from current levels. In fact prices could even fall back to 1.900-1.950 before heading higher again," she adds.
Boele points to the anticipation of Fed rate cuts starting in the third quarter as a factor currently reflected in gold prices.
XAU/USD Outlook for the Remainder of the Year: 2023
Although the Federal Reserve's easing is anticipated to begin by the end of this year, Boele suggests that this may occur later than expected, combined with a modest recovery of the dollar, leading to lower gold prices.
"We think that rate cuts will come later and that the easing will only to start at the end of this year. We also expect a modest recovery of the dollar in the coming months," says Boele.
The analyst believes that these factors will not result in a trend change, but rather a temporary dip in gold prices.
Gold Prospects for 2024
Looking further ahead, Boele holds a positive outlook for gold prices in 2024.
The analyst predicts that monetary policy easing by the Federal Reserve, European Central Bank, and Bank of England will narrow the rate differences between the US dollar, Euro, and Pound Sterling versus gold, which is traditionally considered a zero-interest-rate asset.
"Monetary policy easing by the Fed, ECB and BoE will be a positive for gold prices in 2024 as the rate differences between USD/EUR/GBP versus gold (zero interest rate asset) narrow," says Boele.
However, the strategist implies that the impact might be less significant than when interest rates were considerably lower, as a substantial spread in favour of these currencies is expected to persist.
"Our new year-end forecasts are 2.000 for 2023 and 2.200 for 2024," she adds.
This projection indicates a long-term bullish outlook for gold despite potential short-term setbacks.
Outlook Overview
While gold has enjoyed a strong rally this year, near-term headwinds could lead to a temporary dip before a potential rebound.
The anticipated easing of monetary policies by major central banks in 2024 is expected to support gold prices, although the impact may be tempered by persisting rate differences favouring traditional currencies.