Strategists at German banking giant Commerzbank have downgraded their gold price outlook slightly for 2024, calling for $2,100 instead of the prior $2,150 estimates. But forecasts remain upbeat overall amidst shifting Federal Reserve policy expectations.
Despite revising its Fed interest rate assumptions higher given impressive US economic resilience lately, Commerzbank keeps a constructive longer-run view on precious metals like gold.
Whereas previous projections envisioned Fed Funds rates declining from current 5.5% highs to around 3.5% by end-2025, a smaller cut to 4.25% now seems more likely, according to bank strategists. The adjustment acknowledges robust growth that enables less aggressive easing ahead.
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The Gold price has room for further upside
Nonetheless, the tentative $2,100 gold forecast still keeps prices just shy of 2023’s record $2,135 peak – highlighting room for further upside even on a more tempered Fed trajectory that typically dampens gold’s zero-yield appeal.
“We have lowered the path of our Gold price forecast by $50 and only see XAU/USD rising to around $2,100 over the course of this year, which would leave it just below the all-time high of $2,135 reached at the end of last year, Commerzbank stated.
The bank also expects the yellow metal to log a seventh straight annual gain in 2024, despite the moderation and dollar strengthening observed lately.
Part of gold’s investment case stems from fears around persistent inflation eroding cash savings and fixed income returns over long investment horizons, making hard assets like precious metals appealing for capital preservation.
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And with central banks having limited ammunition to keep hiking rates aggressively on slowing growth, expectations for “lower for even longer” policy rates bode positively for non-yielding gold regardless.
This combination of catalysts leads Commerzbank strategists to defend an overall upbeat outlook on gold through 2024.
So while metal bulls suffer some setbacks from expecting overly relaxed financial conditions ahead, gold’s path still seems paved with upside drivers as macro uncertainty lingers and currencies fluctuate in response.