In a recent interview with Kitco News, Michele Schneider, director of trading education and research at MarketGauge, said that she is bullish on gold and silver in 2024 due to the Fed’s expected rate cuts, but expects that the precious metals market may see some volatility and weakness in the first half of the year.
Analysts believe that the Fed will undoubtedly cut rates this year, but the first rate cut should not be in the first quarter, but not until June. The number of rate cuts is expected to be three, rather than the market previously expected five to six times. The reason why the gold price in the first half of the year will be weak is because the market has been priced in advance five to six times rate cuts this year.
Schneider said that inflation is still being closely watched by central banks, and the threat of inflation has not disappeared from the economic data. At the same time, consumers are increasingly burdened with increased pressure on mortgage and credit card repayments, which could seriously threaten future economic growth. This is why the Fed is in a dilemma on monetary policy, as there are good reasons to cut rates, but at the same time it seems reasonable for rates to remain at higher levels for a longer period of time.
Schneider believes that the price of gold could fall below $2,000 per ounce and test initial support around $1,980 per ounce, and a fall back to $1,940 per ounce in the first half of this year cannot be ruled out. However, a massive sell-off in the gold market is not expected.
In the second half of the year, the Federal Reserve is not expected to hesitate in cutting interest rates to support the economy as recessionary concerns mount, as there are clear signs that the job market has peaked. Precious metals are expected to enter a long-term uptrend looking as high as $2,400 per ounce in the second half of 2024 and 2025 and beyond.
Schneider believes that if the economy collapses and the Fed prefers the option of keeping the economy growing, that’s when price hedges like gold come into play. The worst case scenario is stagflation, where prices rise and growth slows. The reason the gold market is lukewarm right now is because there is no telling what the future holds. Overall, instead of longing for a soft landing, it is better to start preparing for a hard landing.
The price of gold continued to be capped by resistance at $2,050 per ounce during the session on Tuesday (30 January). February gold futures on the COMEX last traded at $2,034.10 per ounce, up 0.43% on the day.
