Gold hit a new high in December 2023 and has remained well above $2,000 per ounce so far this year. The economists of HSBC analyze the prospects for the yellow metal.
Pitfalls loom
Although market sentiment is bullish, we think the price of Gold is overvalued and could decline in the short term in the absence of notable economic or political news. The high price of Gold is also limiting demand for jewelry, coins and bars, mainly in price-sensitive emerging markets, but also in less price-sensitive Western markets.
Gold is historically sensitive to US real rates, and although there has been a significant disconnect in this relationship, we believe positive real rates could be a headwind for XAU/USD this year.
In the event of a USD rebound, Gold prices could come under downward pressure, but sustained USD weakness should be positive for Gold.
Several fundamental factors will keep the price of Gold at what would remain a historically high level. For example, geopolitical and trade risks are high and could remain so in 2024, when 75 countries hold elections, providing underlying support for gold prices. And demand from central banks remains historically strong, triggered by geopolitical risks and portfolio diversification needs, but may not be fully sustained at price levels above $2,000.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
