Gold prices surged significantly in 2023, surpassing the $2,000 mark, propelled by a correction in the dollar and US treasury yields. This adjustment occurred following the US Federal Reserve’s decision to pause its rate hike campaign and indicate potential rate cuts in 2024. Furthermore, the steadfastness in prices was sustained by central bank purchases and the escalation of geopolitical tensions.
Also read: Gold price today: Gold rate rises on geopolitical tensions, rate cut hopes; what should be your strategy for MCX Gold?
According to a report by ICICI Direct, Gold prices are likely to move towards a new high of ₹70,000. “Gold prices are likely to rise further on the back of weak dollar and decline in US treasury yields. Dollar and Yields nosedive in anticipation that the US Fed will start cutting rates as soon as March 2024,” the report said.
The report further highlighted that the rising concerns over slower global economic growth and escalating geopolitical tensions in the Middle East may continue to make gold valuable as a hedge against uncertainties. Additionally, central banks are likely to continue with their buying spree, diversifying their reserves.
Also read: First gold bond of 2024, SGB Series 2023-24 Series 4, opens for subscription next month. Details here
Presently, the price of the yellow metal stands at ₹63,060 per 10 grams on the MCX commodity stock exchange and approximately $2,058 per ounce in the global market. This comes as the rupee is trading above 83 against the US dollar.
In the initial days of December, prices surged once more due to heightened global tensions in the Middle East. Investors in emerging markets foresaw indications that the cycle of interest rate hikes had essentially concluded.
Global central banks purchased ~337 tonnes of gold in Q3CY23, the second-highest third quarter on record. Moreover, central banks have purchased 800t of gold this year so far which is 14% higher compared to the same period last year, the report added.
Also read: Gold rate today ₹1300 away from record high after US Fed minutes. Buy or wait?
“Looking at the current situation, the central bank will continue to add gold to diversify their reserves,” it said.
However, total gold ETF holdings have witnessed a decline in 2023 due to rising interest rates which diverted investors’ attention away from gold. “ We believe fresh investment demand may kick in 2024 amid weak dollar and expectation of rate cuts across major economies. Further, investors will buy gold as store value amid escalating geopolitical tensions in the Middle East and ahead of elections in major economies including India and the US,” ICICI Direct said in its report.
Silver prices outlook in 2024
Meanwhile, silver prices are also likely to move higher as the market is likely to remain in deficit for the third consecutive year. Silver prices are also expected to rise towards ₹85,000, according to the report.
Also read: Gold and silver prices Today on 04-01-2024 : Check latest rates in your city
The global silver market is projected to see another deficit in 2023, marking the third consecutive year. The market deficit is expected to be around 140 million ounces in 2023, the report said.
“Physical investments demand in 2023 is forecasted to decline by 21%. However, in the coming year, fresh investment demand is expected to arise due to weakness in the dollar and buoyant safe haven demand,” the report added.
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Published: 04 Jan 2024, 10:33 PM IST
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