2024 has been a pretty good year so far for investors in gold – for a myriad of different reasons. In the following analysis, Julia Khandoshko, CEO at the European broker Mind Money, shares her outlook with us for the rest of 2024 and beyond for investing in gold – as well as some of the ways for investors to gain exposure to this unique asset class
Mix of geopolitical risks, central bank policies, Federal Reserve rate expectation—all these drive the attention of professional investors to the global gold market, making it a focal point. While gold has proven itself time and again as a reliable store of value, it is unlikely to experience rapid growth in the short term. Market sentiment is leaning towards a steady rise in gold prices rather than any significant jump above $3,000 per ounce by the end of 2024.
What Impacts the Gold Price?
Federal Reserve Rate Cuts. The Federal Reserve’s monetary policy decisions remain one of the main drivers of gold prices. Following the recent rate cuts, more is widely expected in the upcoming November meeting, and here the question is not whether gold will benefit, but to what extent. Now, the market is split between those anticipating a 25-basis-point cut and those expecting a more aggressive 50-basis-point reduction.
Both scenarios will support gold’s value, although the degree of growth will differ:
- A 25-basis-point rate cut would likely result in moderate price increases, in line with the steady growth trajectory gold has maintained in recent years.
- A 50-basis-point cut could act as a stronger catalyst for a more pronounced price hike.
Central Banks. Over the past several years, central banks have steadily increased their gold reserves, positioning gold as a hedge against inflation and currency devaluation. They view gold as an asset for maintaining financial stability, especially in the face of economic and geopolitical uncertainty. This has helped create a stable demand for gold, hence, supporting its price and providing stability against market’s short-term fluctuations. This is very unlikely to change in the near future, as central banks continue to seek safe-haven assets to protect against potential economic shocks.
Geopolitical Tensions. Geopolitics, obviously, are influencing almost all aspects of economics. However, when it comes to gold, the influence is not negative.
The ongoing conflict in the Middle East has renewed interest in gold as a hedge against geopolitical instability. Whenever there is uncertainty in the political or military arena, investors often turn to gold as a means of protecting their capital. Also, the shift in geopolitical focus from Europe to regions like the Middle East and Asia has also had an impact on gold’s demand and will more in the future.
Investment Strategies for Professional Market Participants
Gold remains a reliable hedge for professional investors. But where exactly to invest? Several options are available, each with its own risk-reward profile.
Gold ETFs (Exchange-Traded Funds). ETFs are seen as the most convenient and affordable investment options, because there is a big variety of large and reliable ETFs. This is in fact a great choice for novice investors given its ease of purchase and low entry threshold.
Gold Mining Stocks. Gold mining companies’ shares are also suitable for investing in the yellow metal. For example, investors can consider companies such as Newmont (USA), Barrick Gold (Canada), Freeport McMoRan (USA), and others. However, this investment strategy comes with added risks, including geopolitical instability, regulatory challenges, and operational issues. Despite these risks, mining stocks can offer higher returns compared to direct investment in gold.
Gold Futures Contracts. Futures contracts, which are traded on exchanges such as Chicago Stock Exchange (CHX), allow investors to lock in prices and hedge against potential price volatility. While futures offer significant upside potential, they also require a deep understanding of market dynamics and risk management. This makes them more suitable for professionals with extensive experience in the commodities market.
Outlook for Gold in 2024 and Beyond
Despite the potential impact of Federal Reserve’s cuts and other factors mentioned above, market conditions suggest that gold is more likely to end the year around $2,800 per ounce rather than reaching or surpassing $3,000.
Why? Fairly speaking, expecting gold to cost $3,000 or more is very ambitious, when $2,800 is a more realistic target. This trend is expected to continue into 2025, as the factors that drive gold’s appeal—economic uncertainty, geopolitical instability, and inflationary pressures—remain in place.
For professional investors, the outlook for gold is clear. Gold will continue to be a reliable hedge against market volatility, inflation, and currency devaluation. The challenge lies in selecting the right instruments to gain exposure to gold, whether through ETFs, mining stocks, or futures contracts.
