(Kitco News) – Although gold has started the new year on a quiet note as prices consolidate above $2,000 an ounce, one investment firm expects a sequence of new all-time highs as both gold and silver embark on a long-term bull market.
In their recently published 2024 outlook, analysts at AuAg Funds said they expect to see a 20% rally in gold prices this year, pushing the market past $2,400 an ounce.
The Sweden-based investment firm expects a shift in the Federal Reserve’s monetary policy to drive the rally in precious metals.
“We believe that central banks will shift away from rate hikes and adopt a more accommodative policy stance in 2024, which will catalyze a substantial upswing in gold prices for the foreseeable future,” the analysts said in the report.
The firm said that as the Fed leads the world in rate cuts this year, the U.S. dollar will weaken, creating another tailwind for gold.
However, gold has struggled in recent days, with prices testing support just above $2,000 an ounce as markets start to lower their expectations for a potential rate cut in March. So far gold prices have dropped about 3% since the start of the new year.
As bullish as the fund is on gold, they expect to see silver outperform this year.
“In this emerging bull market, expected to last many years, we predict the gold-to-silver ratio will drop below 30:1, setting an initial goal for 2024 at 70:1,” the analysts said. “Should gold appreciate by 20%, it would end the year at USD 2,475, and with a gold-to-silver ratio of 70:1, silver would close at USD 35, equating to a 48% return.”
As gold and silver are expected to rise, the firm said investors should also pay attention to the mining sector.
“Gold miners are historically undervalued relative to gold, a trend likely to reverse and overshoot during the forthcoming secular gold bull market,” the analysts said. “Gold miners are also historically undervalued compared to the S&P 500, presenting a unique and attractive entry point.”
With higher gold prices driving margins, the analysts noted that mining companies have healthy balance sheets. In the current environment, AuAg expects smaller and mid-cap producers to outperform the mega-cap companies.
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