Gold outlook navigating geopolitical risks

Dec 16, 2023

In the Gold Outlook 2024, where do we land from here, by World Gold Council (WGC) said, from a historical perspective, a soft-landing or a no-landing scenario could result in a flat to slightly weaker average gold performance next year. However, this time around there are two additional factors in gold’s favour:  Geopolitical risks abound.

In 2023 there were two significant event risks – the SVB failure and the Israel-Hamas conflict. Geopolitics added between 3% and 6% to gold’s performance. And in a year with major elections taking place globally, including in the US, the EU, India, and Taiwan, investors’ need for portfolio hedges will likely be higher than normal.

Central bank demand. Purchases by official institutions have helped gold defy expectations over the past two years. In 2023 we estimate that excess central bank demand added 10% or more to gold’s performance. And they will likely continue buying.18 Even if 2024 does not reach the same highs as the previous two years, we anticipate that any above-trend buying (i.e. more than 450–500t) should provide an extra boost.

Furthermore, the probability of a recession is not insignificant. From a risk-management perspective, this would provide strong support to the case of maintaining a strategic allocation to gold in the portfolio.

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