Page 25 - Bullion World Volume 4 Issue 4 April 2024

Bullion World | Volume 4 | Issue 4 | April 2024

What’s next for gold?

Ms Soni Kumari, Commodity Strategist, ANZ Research

The price of gold is scaling new heights –
despite stock markets holding on to gains and
ongoing uncertainty as to when the US will cut
rates. The bullish sentiment is underpinned by
technical buying after the gold price broke the
USD2,100/oz barrier. Although a near-term
pullback is likely due to technical reasons, other
factors could propel the gold price even higher.

Macro drivers
The US policy rate is a long-term driver for gold. A lower
US rate is positive for gold but the timing is still uncertain
on when cuts will materialise in this business cycle.
The FOMC will await a clearer signal that inflation will
return to 2% before it is ready to cut rates. A resilient US
economy is meddling with expectations.

The market now expects the US Fed to cut 75bp in H2
2024. When that happens, the treasury yield will follow
suit. Falling yield reduces the opportunity cost for gold
investments and pushes prices higher. Ms Soni Kumari

The geopolitical risk outlook is unlikely to be as spiky
as it was in the past few years with minor to moderate
economic consequences stemming from regional and 2023, the central banks’ demand for gold now
conflicts. ANZ Research believes gold’s safe-haven occupies a 25-30% share of the total against the long-
appeal is likely be sustained. The upcoming US elections term average of 11%.
will only burnish this appeal.
Central banks added 39 tonnes of gold to vaults in
January 2024. India added 8.7 tonnes, the highest
Despite uncertainties, stock markets have rallied
strongly. This may make investors wary about the since July 2022. China’s buying spree continued, too,
downside risk going forward. Volatility may rise as we with its purchase of 22 tonnes in January and February
inch closer to the US elections and any risk-off sentiment 2024. The stage is set for solid gold buying for the third
will benefit gold. consecutive year.

We estimate annual official purchases for emerging
Central bank gold binge
Central bank gold buying will remain strong as the markets to be above 600 tonnes through 2030. This
uncertain economic and geopolitical backdrop implies is without unreported purchases which historically
a further diversification of risk in their portfolios. After averaged around 25% of total buying. With unreported
purchase adjustment, central gold purchases are likely to
record buying of more than 1,000 tonnes a year in 2022
be in the range of 750–800t in 2024.

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