- The US consumer price index increased by 3.2% annually.
- Gold prices might surge to record highs in 2024 due to decreasing interest rates and growing recession concerns.
- Chinese gold demand remains strong despite weak consumption of other commodities.
On Thursday, gold experienced a rise of up to 0.8% in response to the data release indicating that the US consumer price index increased by a lower-than-expected 3.2% annually.
US inflation (Bureau of Labor Statistics)
This growth fell short of the 3.3% forecast from the Reuters poll. Still, the overall outcome has led to speculation that the US central bank is less likely to implement additional interest rate hikes in 2023. This led to a decline later in the trading session.
“After the CPI commotion subsided, markets recollected that a core CPI of 4.7% remains unfavorable, despite its slower-than-anticipated pace,” stated Matt Simpson, a senior analyst at City Index.
Gold prices will likely surge to record highs in 2024 due to decreasing interest rates and growing recession concerns, boosting its status as a safe-haven asset. On August 7, 2020, Refinitiv data revealed that spot gold prices reached an all-time peak of $2,072.5. CNBC-analyzed experts predict a possible surpassing of this level.
The Managing Director and Global Head of Commodity Strategy at TD Securities, Bart Melek, foresee gold crossing $2,100 by late 2023 or early 2024. This is due to a potential pause in the US Federal Reserve tightening cycle. He optimistically believes the Fed will adjust its policy from the restrictive approach before achieving the 2% inflation target.
Melek’s recent report highlights gold’s exceptional performance in the past year, attributed to its resilience against rising interest rates and its worth as a hedge against inflation. Some analysts are even more bullish on gold, aiming for $2,500 by the next year’s end – a 26% surge.
Gold’s historical strength during economic uncertainty, including recessions and stagflation, is due to its reputation as a stable store of value and a protective measure against inflation. Randy Smallwood, CEO of Wheaton Precious Metals, expresses confidence in seeing $2,500 in gold within a couple of years.
Meanwhile, according to a July report from Citi, Chinese gold demand remains strong despite weak consumption of other commodities. In the report, Citi’s Aakash Doshi, Head of Commodities Strategy, notes that Q1 2023 witnessed Chinese gold jewelry demand approaching 200t. This marked the strongest seasonal performance since 2015.
