The View | 3 reasons the outlook for gold could glitter in 2024
- Despite rising US real yields, the gold market remained resilient in 2023 due to record central bank gold purchases, increased market volatility and geopolitical turmoil
- If investor sentiment towards gold ETFs improves, it could be a powerful tailwind that drives gold prices higher this year
The biggest surprise for gold in 2023 was its continued resilience in the face of rising US real yields led by slowing inflation and higher nominal yields. The US 10-year Treasury yield exceeded 5 per cent in 2023, its highest level since September 2007.
Based on historical correlations between gold and the US 10-year treasury yield, gold would have been expected to fare much worse than it did over this period. Instead, the gold market was steadied by record central bank gold purchases, increased market volatility and geopolitical turmoil.
As inflation levels have begun to trend lower, stabilising near long-term historical averages, the Federal Reserve’s impetus to continue to raise interest rates has largely been removed. In fact, market expectations are currently pricing rate cuts during the first half of 2024, a potential boon for gold prices.